Q2 2025 Huntsman Corp Earnings Call

Ivan Marcuse: Greetings and welcome to the Huntsman Corporation's second quarter 2025 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ivan Marcuse, Vice President of Investor Relations and Corporate Development.

Greetings, and welcome to the Huntsman Corporation second quarter 2025 earnings call.

At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation.

If anyone wants to request assistance, please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce Ivan mahroosa, vice president of investor relations and corporate development.

Ivan Marcuse: Thank you, Joe. Good morning, everyone. Welcome to Huntsman's second quarter 2025 earnings call. Joining us on the call today are Peter Huntsman, Chairman, CEO, and President, and Phil Lister, Executive Vice President and CFO. Yesterday, July 31st, 2025, we released our earnings for the second quarter of 2025 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 of 2025 at our website. Peter Huntsman will provide some opening comments shortly. We will then move to the Q&A 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. All such statements are forward-looking statements. While they reflect our current expectations, they involve risks and uncertainties and are not guarantees of future performance.

Thank you, Joe and good morning everyone. Welcome to Huntsman second chord 2025 earnings call joining us on the call today are Peter Huntsman chairman CEO and president, Phil Lister Executive Vice President CFO yesterday. July 31st 2025, we released our earnings for the second quarter, 2025, via press release and posted to our website. Huntsman.com, we also posted a set of slides in detailed commentary discussing. The second quarter of 2025 on our website.

Peter Huntsville provide some opening comments shortly and we will then move to the Q&A session for the remainder of the call.

Ivan Marcuse: You should review our filings with the SEC for more information regarding the factors that could cause actual results to differ materially from the projections or expectations. We do not plan on publicly updating or revising any forward-looking statements during the call, during the quarter. We will also refer to non-GAAP financial measures such as adjusted EBITDA, adjusted net income or loss, and free cash flow. You can find reconciliations to the most directly comparable GAAP financial measures in our earnings release, which has been posted to our website at huntsman.com. I will turn the call over to Peter Huntsman.

During the call, 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. You should review our filings with the SEC for more information. Regarding the factors that could cause actual results to differ materially from the projections or expectations, we do not have a plan to publicly update or revise any forward-looking statements during the call or during the quarter.

Peter Huntsman: Ivan, thank you very much, and thank you all for joining us. Our Q2 results were not unexpected and came in about where we thought they would. We did see a nice rebound back to what we would see as more normalized earnings from advanced materials, offsetting the disappointing sluggishness of construction activity and tariff uncertainty, especially in polyurethanes. As we step back and look at the macro condition, it appears that the volatility caused by tariff and trade disputes over the past few months is starting to dissipate, at least as of 12 hours ago. I believe that inventories remain very low in most of our downstream supply chain, while consumer confidence seems to be muted. We look into the Q3; we see neither reason to panic nor to be overly optimistic.

Which has been posted to our website at huntsman.com and I'll turn the call over to Peter Huntsman Ivan. Thank you very much and thank you all for joining us.

Our second quarter results were not unexpected and came in about where we thought they would.

We did see an ice rebound back to what we would see as more normalized earnings from Advanced Materials offsetting the disappointing sluggishness of construction activity and tariff uncertainty, especially in polyurethane as we step back and look at the macro condition. It appears that the volatility caused by tariff and trade disputes over the past few months, is starting to dissipate dissipate at least as of 12 hours ago. I believe that inventories remain very low in most of our Downstream supply chain, while consumer confidence, seems to be muted.

Peter Huntsman: However, long term, we do anticipate an improvement in construction and perhaps some gradual change as China seems to be focusing more on their overcapacity. Our focus will continue to be on our balance sheet. To this end, we will continue to be extremely prudent on spending capital beyond our normalized run rate of safety, maintenance, and reliability. We remain focused on our cost structure and making sure that our business expenses are in line with market conditions and our cash generation. Our aggressive inventory and working capital focus allowed us to generate positive cash flow in the Q2. This cost us about $25 million of EBITDA in the Q2. This charge was offset by reduced bonus accruals and other smaller one-time benefits. This inventory impact will be less in the Q3, again offset by bonus accruals.

We look into the third quarter, we see neither reason to panic nor to be overly optimistic, however, long term. We do anticipate an improvement in construction and perhaps some gradual change is China. Seems to be focusing more on their over capacity.

Our focus will continue to be on our balance sheet. To this end, we will continue to be extremely prudent on spending capital, beyond our normalized run rate of safety, maintenance, and reliability.

We remain focused on our cost structure and making sure that our business expenses are in line with market conditions and our cash generation.

Our aggressive inventory in working capital Focus allowed us to generate positive cash flow in the second quarter. This cost us about 25 million of evda. In the second quarter. This charge was offset by reduced bonus, approvals, and other smaller 1-time benefits.

Peter Huntsman: As markets improve or raw materials drop in value, we want to make sure that we're in a position to take advantage as soon as possible. We will operate our business to create value over volume to the extent that we can. We continue to review our asset portfolio and engage with shareholders. The last thing we want to be doing is sitting around waiting for things to get better. Over the next few quarters, we will see usual seasonality, but also the possible influences of higher tariffs and duties for MDI coming into North American markets, a possible interest rate cut, the benefits of more of our cost reductions falling to the bottom line, and hopefully a greater focus on prices over volume. In short, we will manage our balance sheet as effectively as possible while also pushing for better P&L outcomes.

This inventory impact will be less in the third quarter. Again offset by bonus approvals.

As markets improve or raw materials drop in value, we want to make sure that we're in a position to take advantage. As soon as possible, we will operate our business to create value over volume to the extent that we can. We continue to review our asset portfolio and engage with shareholders.

The last thing we want to be doing is sitting around waiting for things to get better over the next few quarters. We will see usual seasonality but also the possible influences of higher tariffs and duties for MDI coming into North American markets, a possible interest rate, cut the benefits of more of our cost, reductions falling to the bottom line and hopefully a greater focus on prices over volume.

Peter Huntsman: With that, operator, why don't we open the line up for any questions?

In short, we will manage our balance sheet as effectively as possible, while also pushing for better P&L outcomes with that operator. Why don't we open the lineup for any questions?

Ivan Marcuse: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. Due to the interest of time, we ask that each analyst limit themselves to one question and one follow-up. Thank you. Our first question comes from the line of Kevin McCarthy with Vertical Research Partners. Please proceed.

Thank you, sir.

Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad and the confirmation total indicate your line is in the question queue.

You may press star 2. If you would like to remove your question from the queue for participants using speaker equipment and maybe necessary to pick up your handset. Before pressing the star Keys, enter the due to the interest of time. We ask that each analyst limit limit themselves to 1 question and 1, follow-up. Thank you.

And our first question comes from the line of Kevin McCarthy, with vertical, research Partners, please proceed.

Phil Lister: Thank you and good morning. Peter, would you comment on MDI utilization rates in the second quarter and how you see those progressing into the third quarter for the industry as well as Huntsman?

Thank you, and good morning. Uh, Peter, would you comment on MDI utilization rates in the second quarter and how you see those progressing into the third quarter? Uh, for the industry as well as Huntsman?

Peter Huntsman: Yeah, much of that, Kevin. Very good question. Something that we struggle with because there's not a great deal of information as to how people are running their plant and what capacity they're running their plant. Obviously, with the tariff situation and so forth, the product that was coming into North America from China, that product is either being scaled back in capacity or going into other markets. We're not seeing a lot of that product showing up in Europe, which is something that some of us feared a couple of months ago would be the case. It really is quite a fluid question. I would say that by and large, the industry is operating somewhere in the low to mid 80 percentile. That's going to probably be a little bit higher than that in North America, perhaps a little bit lower than that in China.

Yeah, much at Kevin, uh, very good questions. Something that we struggle with because there's not a great deal of information as to, uh, how people are running their plan and what capacity they're writing their plan. Obviously, with the tariff situation and so forth with product that was coming into North America from China, that product is either being scaled back in capacity or going in.

Peter Huntsman: But I believe that's about where we are today.

Into other markets. We're not seeing a lot of that product, for instance, showing up in Europe, which is something that some of us, feared a couple of uh, months ago would be the case. So it's it really is quite a fluid question. I would say that by and large the industry is operating somewhere in the low to mid 80 percentile uh that's going to probably be a little bit higher than that in North America. Perhaps a little bit lower than that in China. Uh, but that's I, I believe that's about where we we are today.

Phil Lister: Thank you very much.

Thank you very much.

Ivan Marcuse: The next question comes from the line of Patrick Cunningham with Citibank. Please proceed.

The next question comes from the line of Patrick Cunningham with City. Please proceed.

Patrick Cunningham: Hi, good morning, and thanks for taking my question. Can you give us an update on how your order books have progressed in July? I think we're hearing some mixed signals on sort of, you know, if things are stable or if things are getting worse in July. What are some of the conversations you're having from larger customers in auto and building and construction, given the recent tariff implementation?

Hi. Good morning and, and thanks for taking my question C. Can you give us an update on how, you know, your order books have progressed in July? I think we're hearing some mixed signals on sort of you know if things are stable or things are getting worse in July and what are some of the conversations you're having from larger customers in in Auto and building a construction given, you know, the recent tariff implementation

Peter Huntsman: I think that stable would probably be the best singular description as to what we are seeing across the board. There are some pockets here and there, just anecdotally. I think that there are a number of truckload orders, rail, which would tell you that people are ordering just in time, which would tell you that inventories are probably lower than usual. In my personal opinion, I believe that the supply chains are pretty thin right now. People in times of uncertainty, especially where the overall energy market, the energy structure is down from where it was six months ago. People are probably not going to be holding a lot of inventory on the expectation that the energy costs will be coming down, chemical costs and so forth.

Peter Huntsman: So I think that it is very thin right now, and people are kind of ordering just what they need for the next 30 days or so. But right now, I am not seeing a pickup that would give me a great deal of optimism. Conversely, I am not seeing a big drop-off in any one area that would give me pessimism.

I I think that stable would probably be the the best singular uh, descriptions of what. We're seeing across the board. I mean, there, there's some Pockets here. And there, just anecdotally, I think that, you know, that there are a number of, of, of truckload orders rail. Would you tell people are ordering? Uh, just in time inventory. We should tell you that inventories are probably lower, uh, than usual, uh, in my personal opinion. I believe that the, the supply chains are pretty thin right now, uh, people in times of uncertainty, especially where the overall energy Market. Uh the energy structure is is down from where it was 6 months ago. Uh, people are probably not going to be holding a lot of inventory on the expectation that that, uh, the energy costs will be coming down, uh, chemical costs and so forth. Uh, so I, I think that it's, it's very thin right now and people are, are kind of ordering just what they need for the next 30 days or so. Uh, but right now, I, I'm not seeing

Uh, a pickup that would give me a great deal of optimism. Uh, conversely, I'm not saying, uh, a big drop-off in any one area that would give me pessimism.

Patrick Cunningham: Great, very helpful. Peter, you seem to be optimistic on potential China supply rationalization, but it seems there is still pretty healthy capacity build expectations in MDI. So where do you see this potentially having the most significant impact in terms of the key chains or what it might mean for Huntsman's earnings levels going forward?

Great. Very helpful and Peter, you seem to be optimistic on, you know, potential China Supply rationalization. But it seems, there's still pretty healthy capacity, build expectations, and MDI. So, where do you see this? Potentially having the most significant impact, in terms of the key chains? Or, you know what, it might mean for huntsman's earnings levels, going forward?

Peter Huntsman: I would say that as we think about Chinese capacity and so forth, China, where you have the greatest concentration of production, continues to be our most profitable market for MDI. Our business in China is performing quite well in comparison to North America and very well in comparison to Europe. So I think that there is a combination probably of volume discipline, pricing discipline, and what have you. We are also seeing some greater trade movements and so forth. At the time, as we look at the first six months of this year, we have seen Chinese imports into North America of MDI virtually stop. For some reason, we have seen imports coming in from Europe, of all places, increase. That is not offsetting each other one for one, obviously. But there are some rather unusual trade patterns.

Well, I, I would say that that as we think about Chinese capacity and, and, uh, and so forth that China, where you have, uh, the, the greatest concentration of, of production continues to be our most profitable Market, uh, for MDI. And our, our business in China is performing quite well in comparison to North America and they're very well comparison to Europe. Uh, so I I think that there's a combination probably of of volume discipline pricing discipline and uh, you know what, what have you and we're also seeing, you know, some greater, uh, trade movements and so forth. I had the the time we, as we look at the first 6 months of this year, uh, we've seen Chinese Imports into North America of MDI virtually stopped. Uh, you know, for some reason, we've seen Imports coming in from Europe of all places increase. Uh, now that's not offsetting each other 1 for

Peter Huntsman: By and large, I do not think there is anything terribly surprising that is taking place right now.

1 obviously, uh, but it so so there are, there are some rather unusual trade patterns but by and large, uh, I don't think there's anything, you know, terribly surprising. It's taking place right now.

Ivan Marcuse: Thank you. Questions from the line of Jeff Zekauskas with J.P. Morgan. Please proceed.

On the line of Justice zakowski with JP Morgan please proceed.

Various Analysts: Thanks very much. I think earlier in the call, you said that utilization rates in polyurethanes were in the low to mid 80s. Is that where your utilization rates are?

Uh, thanks very much. Um,

I think earlier in the call, you mentioned that utilization rates in polyurethane were in the low to mid-80s.

Is that where you don’t want to say Champs rates are?

Peter Huntsman: Yeah, I'm not sure that we're too dissimilar from, you know, where they'd probably be. We run our plant in China at pretty high rates because we've got good market demand there. The automotive sector in China continues to perform quite well, and everything else is pretty stable. I wouldn't say that it's growing through the roof. Europe obviously continues to struggle, and North America, yeah, we're probably running in the mid 80s, you know, give or take a few percentage points. I'm not sure that we're terribly different than most of our peers.

Yeah, I I'm not sure that we're too dissimilar from, uh, you know, where they'd probably be. We we run our plant in China at, uh, pretty high rates because we've got good market demand there. Uh, the, the automotive sector in China continues to perform, quite well. And everything else is is you know, pretty stable. I wouldn't say that it's growing through the roof. Uh, Europe obviously continues the struggle in North America. Uh, you know, we're we're probably running in the mid 80s with uh, you know, give or take a few percentage points. So I'm not sure the word we're terribly different than most of our peers.

Various Analysts: What are your utilization rates in Europe?

What, what are your utilization rates in Europe?

Peter Huntsman: Those would probably be around 80%.

Uh, those those would probably be around 80%.

Various Analysts: Okay, great. Thank you very much.

Peter Huntsman: Thank you.

Okay, great. Thank you very much.

Thank you.

Ivan Marcuse: The next question comes from the line of Frank Mitsch with Fermium Research. Please proceed.

Various Analysts: Hey, good morning. Hey, Peter, what are your latest thoughts on the dividends?

The next question comes from the line of Frank Mich with premium research, please proceed.

Hey, good morning. Um, hey Peter, what are your latest thoughts on the dividends?

Peter Huntsman: Frank, this is obviously something that our board looks at very carefully, and they look at it not just on a quarterly basis, but we have discussions on a monthly basis. We look at the steps that we're taking around cash generation as a company, demonstrated from this last quarter. As we look into the second half of the year, we have further steps that we'll be taking on cash generation and so forth. We feel that we're in a pretty good place right now. We obviously want to be at a place where perhaps at the top of the cycle, people are saying, you ought to be doing more. At the bottom of the cycle, it probably will be on the higher end, given the volatility of our portfolio. I think that for the time being, we feel comfortable with where we are.

well, uh,

The year we have, uh, further steps will be taking on cash generation and so forth. Uh, you know, we feel that we're in a pretty good place right now. Uh, we obviously want to be at a place where perhaps at the top of the cycle, people are saying, well, you ought to be.

Peter Huntsman: At the same time, we don't have our head buried in the sand, and it's not going to be something that we would be paying a dividend if it's going to be materially harmful to our balance sheet.

Doing more and the bottom of the cycle people out of it. It probably will be on the higher end, uh, given the volatility of our portfolio. Uh, so I think that for the time being that, uh, we feel comfortable where we are, but at the same time, uh, we don't have our head buried in the sand, and it's not going to be, uh, something that we would be paying a debt, uh, dividend. If it's going to be materially harmful to our balance sheet.

Various Analysts: Understood. So how much longer, given all the actions you are taking on the cash side and you know, shoring up your balance sheet, how much longer do you think at this level of earnings? Do you feel, how comfortable do you feel through the end of 2025? Is this a 2025 decision at this level of earnings? Is it a 2026 decision at this level of earnings? I mean, obviously, the assumption is, as you indicated, that near term, no reason to panic or be optimistic, but long term, you see things improving. I am just curious as to how long you feel you would tolerate it at this level of earnings.

Understood, uh, so how much longer, you know, given given all the actions you're taking on the, on the cash side?

And on the balance, you know, showing up your balance sheet, um, how much longer do you think at this level of earnings?

Uh, do you think, uh, you know, uh, uh, do you feel how comfortable do you feel through the, through the end of 2025? Is this a 25 decision at this level of earnings? Is it a 26, uh, decision at this level of earnings? I, I mean, obviously, the assumption is as you indicated that near term, no reason to Panic or be optimistic, but long term. You see things improving? I'm just curious as to, you know, how long you you, you feel

You know, you would, you would tolerate it at this level of earnings.

Peter Huntsman: Well, I think that, Frank, it is a very good question. I think that is the question with very limited visibility on earnings that we have right now, given the volatility around tariffs and, you know, in pricing discipline and so forth. It is something that we will be looking at on a quarterly basis. As we look at probably between now and the end of the year, I think that we have, I would not say that we have got a very good picture, but I think we have got a fairly decent picture as to where we are. I think a dividend is not just a short-term sign of how you feel about it, but it is also a long-term sign.

Well, I I think that that Frank, it's a very good question. I think that's the question with, uh, very limited visibility on earnings, uh, that we have right now given the volatility around tariffs and, uh, you know, in in pricing discipline and so forth. Uh, it is something that we will be looking at on a quarterly basis. And, as as we look at probably between now and the end of the year, I think that that we have, I wouldn't say that we've got a very good picture, but I think we've got a, a fairly decent picture as to where we are. Uh, I think a dividend is, is not just the short term.

Peter Huntsman: I think that if we, you know, if we get into, particularly into early next year, and we see that there is another muted cycle or a global recession or a muted cycle on construction, for example, or we are in a global recession, things have gotten worse and do not appear to be getting any better. I think the board will make appropriate decisions. At that point, at this point, when we look at our cash generation, what we are working on, where our focus is, and, you know, where we think the overall company is going, we feel that we are in a good position.

Sign of of how you feel about it. But it's also a long term side. And I think that if we, you know, if we get into particularly into early next year and we see that there's another muted, uh, cycle or a global recession, or a muted cycle, on construction, for example, or the we're in a, a global recession. Uh, thing, you know, things have have gotten worse and don't appear to be getting any better. I think the board will will make appropriate decisions. But at that point, uh, at this point, when we look at our cash generation, what we're working on where our focus is and, uh, you know, where we think the overall company is going. We we feel that we're in a good position.

Ivan Marcuse: The next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed.

The next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed.

Phil Lister: Thank you. Good morning. Peter, I wonder if we could talk about what you think trade finality means and what your customers think. In other words, can we get to a point where the trade war is somehow resolved? What does that mean? Does it mean we have agreements with all these countries, including China, and that's it? We all know what things are, and that's the moment where life goes on and people go back to purchasing and so forth in a normal manner? Or do you think there's always going to be some uncertainty within the current construct just because these things can keep changing, they can keep evolving, or people don't abide by it, and so that we're going to wind up staying in a more cautious purchasing and customer behavior period for a longer period of time, even if there's any sort of resolution?

Phil Lister: How are you thinking about it, and what do you hear from your customers?

Uh, thank you. Good morning, Peter. I wonder if, if we could talk about what you think, trade finality means, um, and what your customers think, so? In other words, like, can we get to a point where the trade war is, is somehow resolved? And what does that mean? Does it mean we have we have um you know agreements with all these countries including China um and that's it and we all know what things are and and and that's the moment we're life goes on and people go back to to to purchasing and and so forth in in a normal manner or do you think there's always going to be some uncertainty within the current construct? Just because, you know, these these things can keep changing. They can keep they can keep evolving or people don't abide by it and so that we're going to we'll wind up staying in a more cautious, uh, purchasing and and customer Behavior period for a longer period of time even if there's any sort of resolution, how, how are you thinking about it and what do you hear from your customers?

Peter Huntsman: You are asking me, and I mean this with absolutely no disrespect, but you are asking me to get into the head of the administration presently in place, which I think is an impossible analysis. I would say broadly that the U.S. economy and our customers, our suppliers, our biggest issue is volatility. If we are going to pay higher tariffs, if they are going to be duties, if they are going to be barriers, whatever, let us figure out what they are. Let us work around them, work through them, work with them, do what we need to do. It is just, it is kind of like with raw material prices. I can live with $100 crude oil. I would rather not, but we can if we know that is going to be the new normal or something close to that.

Well, you, you're asking me, and I mean, this with absolutely no disrespect. But you're asking me to get into the head of the administration, uh, presently in place which, uh, I I, I think is an impossible, uh, analysis. But I, I would say, broadly that, uh, the, the US economy in our customers, our suppliers, uh, don't our. Our biggest issue is volatility.

Peter Huntsman: What is very difficult is when you have a market that goes from $100 to $30 to $100, and you are dealing with massive working capital changes and so forth. That is not unlike trade policies. Particularly with the long supply chains that we have around the world today, it is very volatile. When you look at the case of Huntsman Corporation and the impact on Huntsman Corporation, by and large, as a company, we do not move a lot of products overseas. Trade does not impact this company all that much, trade barriers and trade duties. With our raw material suppliers, most of our raw materials are supplied within region. We do not hear a lot of noise from our raw material suppliers. I think from our raw material side, not a big deal. From ourselves, not a big deal. Now I get down to our customers.

Peter Huntsman: Automotive, completely all over the place. We look at the trade in aerospace and the impact that that is having from one negotiation to another. You look at the supply chains that are going into the construction materials market, timber from Canada and everything. The customers, the further downstream you go, the greater volatility there is. The closer you get to the consumer, you are going to see even greater volatility and uncertainty. I am not sure anybody really benefits from that volatility. The consistent message I hear, not just in the U.S. but around the world, is whatever it is going to be, let us get to that point, let us figure out what it is, and we can deal with it. I believe that is ultimately where we are going to be headed.

Very volatile. Now when you look at the case of huntsman and the impact on Huntsman by and large as a company, we don't move a lot of products overseas, uh, trade doesn't impact this company, uh, all that much, a trade trade barriers and trade duties with our raw material suppliers. Most of our raw materials are supplied within region, and we don't hear a lot of noise from our raw material suppliers. So, I think from our raw material side, nah, not a big deal from our our ourselves, not a big deal. Now I get down to our customers Automotive, completely all over the place. Uh, we look at the the trade, uh, in Aerospace. And the impact that that's having from 1 negative to another. You look at the supply chains that are going into the construction, materials Market, Timber from Canada, and everything. The customers are further. Downstream you go, the greater volatility. There is now closer you get to the consumer. Uh, you're going to see even greater volatility and uncertainty. So, I'm not sure anybody really benefits from that volatility.

And uh what the the consistent message, I hear not just in the US but around the world is whatever is going to be. Let's let's get to that point. Let's figure out what it is and we can deal with it and so I I I believe that's that's ultimately uh, where we're going to be headed.

Various Analysts: Okay, thanks very much.

Okay, thanks very much.

Ivan Marcuse: The next question comes from the line of John Roberts with Mizuho Securities. Please proceed.

The next question comes from the line of John Roberts with Meizuo. Please proceed.

Phil Lister: Thanks, Peter. The prepared remarks mention advanced materials as the primary focus for bolt-on acquisitions. I don't expect that you'd be making any bolt-on acquisitions near term, but are you no longer interested in Huntsman Building Services or Huntsman Building Systems, HBS, as an area long term?

Um, thanks Peter, the prepared remarks mentioned Advanced Materials is the primary focus for bolt-on acquisitions.

I I don't expect that you'd be making any bolt-on Acquisitions near term but are you no longer interested in Huntsman Building Services or function Building Systems HBS um as an area long term.

Peter Huntsman: I think I learned from my father a long time ago, you never say never in the area of M&A, but at the same time, you do have to have a strategy. You cannot just look and buy anything that is available. I think that as we look at where we want to be moving as a company, we want to be able to take advantage of adhesives. We want to be taking advantage of aerospace, lightweighting, energy conservation. As we look at our most stable lens of our business, if we go down and we look at electronics, we look at elastomers, as we look at our adhesives, lightweighting, carbon fiber, composite materials, and so on, those are all areas, I think, for us that we have been able to build a nice platform, and we would like to continue to do that.

Peter Huntsman: You look at something like polyurethanes, and of course, within our polyurethanes business, we have elastomers. We have some of those applications that are further downstream. Those businesses are the best performing parts of our polyurethanes business today. I do not want to sit here and say that we would never do anything in polyurethanes, but if we do, it would probably be something that would complement that end of the business more so than the more volatile and commodity side of things.

Well, I, you know, I think, I, I learned from my father a long time ago. You never say, never in the early of m&a, but at the same time you do have to have, uh, a strategy. You can't just look at and buy anything that that is available. Um, I think that is is we look at where we want to be moving as a company. Uh, we want to be able to take advantage of adhesives. We're going to be taking advantage of Aerospace lightweighting energy, conservation. And as, as we look at our most stable lens of our business. As we go down, we look at Electronics, we look at elastomers. Uh, as as we look at our adhesives, uh, lightweighting carbon fiber composite materials and so forth. Those are all areas, I think, uh, for us that we've been able to, to build a nice platform and uh, we'd like to continue to do that. Now, you look at something like polyurethane and of course, within our polyurethane business, we have the last numbers. Uh, we have some of those

Application, so, uh, that are further downstream, those businesses, um, are the best performing, uh, parts of our polyurethane business today. So, I don't want to sit here and say that we'd never do anything in polyurethane, but if we do, it would probably be something that would complement that into the business, more so than the more volatile, uh, commodity side of things.

Phil Lister: Thank you.

Thank you.

Ivan Marcuse: The next question comes from the line of David Begleiter with Deutsche Bank. Please proceed.

The next question comes from the line of David beg, lighter, with dorsa bank. Please proceed.

Phil Lister: Thank you. Peter, do you expect the tariffs we now have on Chinese MDI to lead to, at some point, a new U.S. MDI plant? Not by you, but maybe a competitor?

Thank you.

Tariffs. You now have on Chinese MDI to lead to at some point. A new US MDI plant by by you but maybe a competitor.

Peter Huntsman: I can only give you a. I will tell you it will not lead to a new plant by Huntsman Corporation, at least not while I have anything to do with managing the company. What competition decides to do, I have no idea. I personally believe that there is more than enough MDI in the world today, and we will be just fine. If you put barriers up around the U.S. on imports, let us remember that the U.S. also exports its MDI in the markets, for instance, into Latin America, into Canada, and so forth. You have also got to realize that if you are putting imported materials that are going into Latin America and Canada and so forth, there is less export from the U.S.

Uh, well, I can only give you it, okay. I will tell you, it will not lead to a new plant by Huntsman. Uh, I can not at least not while I have anything to do with managing the company. Um, but uh, what competition decides to do? Uh, I have no idea. I, I personally believe that there's more than enough MDI in the world today, uh, and we'll, we'll be just fine. But, uh, I, I

Peter Huntsman: I think that a lot of people can make a mistake by just drawing a circle around the United States and somehow thinking that that is going to be this fortress that what is in the United States stays within the United States, and nothing can penetrate it from Europe or anyplace else. As I said, trade is a messy subject, and I think presently the world has got plenty of MDI capacity; it does not need any more.

If if you put barriers up around the US on Imports, let's remember that the US also exports its MDI into markets and the for instance, in the Latin American into Canada and so forth. Uh you you've got to you you've also got to realize that if if you're you're putting imported materials are going into Latin America and Canada and so forth. There's less exports from the US. I think that a lot of people can make a mistake by just drawing a circle around the United States and somehow thinking that that's going to be this. This this this Fortress that, what's in the United States. Stays within the United States. And nothing can can penetrate it from Europe or any place else. Uh, like I said, trade trades, a messy subject and, and, uh, I'm I don't

Phil Lister: Got it. Just one more on aerospace. We are seeing production rates increase. I know there is a mix for you guys with wide body versus narrow body. When do you expect the stronger build rate cycle to impact your business specifically?

I think presently the world's got plenty of NBI capacity; it doesn't need any more.

And and just 1 more on Aerospace. We are seeing seeing production rates increase. I know there's a mix between for you guys with with why why buy risk narrow body. But when you, when you expect the

Stronger build rate cycle to impact your business. Specifically.

Peter Huntsman: I think it will probably be in the next, you know, within the next couple of quarters, next three, four, five quarters. The reason that you have got to make sure that you understand the difference between deliveries and build rate. When an airline says that we are delivering eight airplanes, for example, without getting into any particular airline, how many of those airplanes have been sitting already built and have been sitting on the tarmac waiting for FAA or European inspections and certification? How many are planes that were built months or quarters ago, and how many of those planes were built this month? When you say that there are eight planes that are being delivered, I want to make sure that we are focused on the build rate versus the delivery rate. I like to see the delivery rate up because the airlines need to move inventory.

I, I think it'll probably be um, in the next uh, you know, within the next couple of quarters. Next 3, 4, 5 course. The reason that you, you've got to make sure that you understand the difference between deliveries and build, right? And when a airline says that we're delivering 8 airplanes for example, without getting into any particular Airlines, how many of those airplanes have been sitting already built and have been sitting on the tarmac waiting for uh, FAA or european. Uh, inspections and certification. How many airplanes that that were built months or quarters ago? Uh, and how many of those planes were built this month. And so when you, when you say that there are 8 planes that are being delivered, uh, I I I want to make sure that we're focused on the build rate.

Peter Huntsman: You go up to the Boeing field, you can just look at it on Google Earth. They have got literally scores of 777Xs, next generation of planes that are not even flying yet. They have got scores of these things that have been sitting there for years waiting for federal certification. That is going to be an important application for our materials when that plane is being fully built. You are going to have to clear out a lot of stock before you get to what I would consider to be a normalized run rate. Sorry, it is a laborious answer, but there is a difference between the number of planes that are delivered and the number of planes that are manufactured and the inventory of those planes that are sitting about waiting to be finished, certified, and sent to customer.

Versus the delivery rate. Uh, I like to see that the delivery rate up because they the airlines need to move. Inventory, you go up to the Boeing field. You can just look at it on Google Earth. They've got they've, they've got literally scores of Triple 7 X's the next generation of planes that aren't even flying yet. They've got scores of these things that have been sitting there for years, waiting for federal, uh, waiting for federal.

Um, certification. So and that's going to be an important application for our materials. Uh, when that when that plane is, is being, uh, fully built. But you, you have to clear out a lot of stock before you get to what I would consider to be a normalized run rate. So, sorry, so laborious answer. But there, there is a difference between number of planes that are delivered and the number of planes that are manufactured and and the inventory of those planes that are that are sitting about waiting to be, uh, finished certified and sent to customer.

Ivan Marcuse: The next question comes from the line of Salvator Tiano with Bank of America. Please proceed.

The next question comes from the line of Salvador Tiano with Bank of America, please proceed.

Phil Lister: Yes, thank you very much. Firstly, I want to go to the closure of the Malecon Hydrate facility in Europe. If you can tell us a little bit about what was your process and how things unfolded there, mostly because when you started the strategic review, you mentioned that you explicitly undertook this action because you received unsolicited interest in the facility. What happened, I guess, in the meantime, and you decided to shut it down instead?

Um, yes, thank you very much. Um, so firstly, you know, I want to go to the closure of the Malikan hydride facility in Europe. And just if you can

Tell us a little bit about how, what was your process, and how things unfolded. They're mostly, because when you started the Strategic review, you mentioned that you explicitly, um, undertook this action because you received them so listed interest in the facility. Uh, so what happened? I guess, in the meantime and you decided to shut it down instead.

Peter Huntsman: We originally looked to see if there would be a better owner of that facility than us. We looked at options of selling it. We looked at options of keeping it. We reviewed, I think we reviewed every option imaginable. The last thing you ever want to do is be in a position where you are having to close an asset. When we looked at the reliability of that facility and the cost of that facility, the lack of competitiveness in the European market, we determined that the facility was unsellable, and we made the decision to shut it down. Not our preferred decision, obviously, but one that we felt we have no alternative given the overall market conditions and so forth that were there.

Well, we, we originally looked at to see if there would be a, uh, a better owner of that facility than us. And, uh, we we looked at at options of selling. It we looked at at options of keeping it, uh, you know, we we reviewed. I think we, we reviewed every option imaginable. The last thing you ever want to do is be in a position where you're having to close an asset. And when we looked at the, the reliability of that facility and the cost of that facility, that the lack of of competitiveness, uh, in the European market.

Phil Lister: I will recognize that for maleic, 85% of the cost of maleic is butane. That is going back into the high energy costs which exist in Europe, and we do not see those materially changing going forward, and hence the decision that Peter Huntsman outlined. If I may ask, Cole, about the future of your European footprint, not on a little bit more downstream polyurethanes, but on the core MDI Rotterdam facility, there is a bunch of PO shutdowns, a number of them more likely to come as well. So at what point do you think that European demand may permanently be impaired for MDI, and there may not be enough demand for your own facilities there?

Uh we we determined that that the facility uh was unsellable and we made the decision to shut, shut it down. Uh, not our preferred decision, obviously, but 1 that we felt, we have no alternative given the overall market conditions and so forth that were there. And so I'll recognize that for Malay 85% of the cost of Malay is butane, that's going back into the high energy costs which exist in Europe and we don't see those materially changing going forward. And and hence the decision that that Peter outlined

Perfect. And you saw me, ask go above the future of your, you know, your European footprint not on a little bit more Downstream policy, but on the core MDI router than facility. I mean, there's a bunch of PS shut Downs, uh, a number of them, more likely to come as well.

So at, at what point do you think that European demand may permanently be impaired for MDI? And there may not be enough demand for, you know, your own facilities there.

Peter Huntsman: I think that we have either the lowest or among the lowest production sites in Europe, and I believe that that site is going to be competitive relative to other European producers for some years to come. I would be, if we get to a point where we cannot justify the operations of our European facility, I think that there will probably be other facilities that will come to that conclusion before we do. However, we do continue to look at all of our operating costs there. We look at our operating viability. I see longer term, as I see today, that is a very limited vision. But as I see today, that is a site that we are going to continue to operate, and it is a segment of the market and polyurethanes that we are going to continue to feed.

Continue to look at all of our operating uh costs. There we look at uh at our operating viability and uh but I see longer term uh as I see today, this is a very limited Vision. But as I see today, uh that's a site that that we're going to continue to operate and uh, was just like it said, segment of the market and polyurethanes that we're going to continue to feed.

Ivan Marcuse: The next question comes from the line of Josh Spector with UBS. Please proceed.

The next question comes from the line of Josh Spectre with UBS. Please proceed.

Various Analysts: Yeah, hi, good morning. I wanted to ask in advanced materials, you know, you cited power and industrial markets helping lift the EBITDA in the quarter. Curious how much of that you would frame as structural improvement. It seems like maybe that is the case in power versus pull forward to some cyclicality there and what is being baked into Q3. Thank you.

Yeah. Hi, good morning. Um, I want to ask an Advanced Materials, you know, you cited power and Industrial, markets helping, uh, lift ibida in the quarter.

Curious, how much of that, you'd frame is structural Improvement, it seems like, maybe that's the case in power versus pull forward, or some cyclicality there and, and what's being baked into 3 Q. Thank you.

Peter Huntsman: I think what we saw in Q2 was a more normalized run rate rather than a one-time basis. As you continue to see power, I think we will continue to be a very stable platform. I think aerospace is going to continue to improve. The build rates start stabilizing more, given my earlier comments and so forth. Again, that is not to say that you will not see a bit of volatility, but certainly nothing like what we see in the other divisions. I would say that as you look at Q2, as we look into Q3, as we send our prepared remarks, you will see a little bit of seasonality. This is largely a European business, and Europeans have a tendency to take a few days off in August. So, you might see a bit of impact on that.

I, I think what we saw in second quarter was a more normalized run rate rather than a 1-time basis. And as you as you continue to see Power, I think will continue to be a very stable, uh, platform. I think Aerospace is going to continue to improve, uh, is the build rates, uh, start stabilizing, uh, more given my earlier comments, and so forth. Uh, again now that's not to say that that you won't see a, a bit of volatility, but certainly nothing like what we're seeing in the other divisions. So I, I'd say that as, as you look at at, uh, second quarter as we look in

Into the third quarter. As we send our prepared remarks, you'll see a little bit of seasonality. This is largely a European business and Europeans have a tendency to take a few days off in August. And so, uh, you know, you might see a bit of impact on that.

Various Analysts: Makes sense. If I could ask quickly for Phil, you had a $7 million benefit in performance products from what appeared to be an accrual reversal or something of that sort. Was that expected in Q2, and is there anything else like that to call out in Q3?

Makes sense. And if I could ask quickly for Phil, you had a 7 million dollar benefit in Performance Products from you know what appeared to be an AC cruel reversal or something of that sort, was that expected in 2q. And is there anything else like that to call out in in the 3Q?

Phil Lister: No, I would say a reversal of a loss contingency accrual related to our U.S. operations, Josh, that we had in performance products. I think we've called out as well in the second quarter that we did take a negative impact from asset utilization related to the reductions in our inventory. That was offset by the release of our bonus accruals as we obviously reassessed our bonus accruals for the year. As you move into Q3, I think each of those three items will roughly balance themselves out, and you won't have a significant impact between Q2 and Q3 related to those.

No. And so I would say a reversal of

A loss contingency, acral related to our us operations Josh that we had in in Performance Products. Um, I I think we've called out as well in the second quarter that we did take a, a negative impact from, uh asset utilization related to the reductions in our inventory. Uh, that was offset by the release of our bonus AC crus as we've obviously reassessed our bonus approvals for the for the year. As you move into quarter 3, I think each of those 3 items will roughly balance themselves out and you won't have a significant impact between Q2 and Q3 related to those.

Various Analysts: Okay, thank you.

Okay, thank you.

Ivan Marcuse: The next question comes from the line of Mike Sison with Wells Fargo. Please proceed.

The next question comes from the line of Mike Sisson with Wells Fargo. Please proceed.

Various Analysts: Hey, good morning, guys. Peter, when you think about China, they've talked about involution. Is there a good amount of capacity there that could or maybe should be looked at and maybe taken out that could help the supply-demand situation we're in now?

Hey, good morning, guys. Um, Peter, when you think about China, you know, they, they've talked about involution, is there a good amount of capacity there that that could or maybe should be looked at and, and maybe taken out that could help the supply demand um situation we're in now.

Peter Huntsman: Very good question. I think, China is, I have heard more in the last 30 days than having been there in the last couple of two, three weeks ago. More discussion in country, certainly than I hear out of country about the government looking at overcapacity, looking at older facilities. As I look at the MDI situation in China, most every facility in MDI in China is not only very good technology, but is also some of the largest scale, largest best integrated facilities that are integrated all the way up to energy production, aniline production, coal production, all the way down through the line. I think that there will be a number of closures that will take place in the chemical industry over the next year or two or three.

Peter Huntsman: I do not believe that that will be the case for MDI, particularly if you compare the competitiveness of those facilities with 30, 40, 50-year-old facilities that are operating in Europe that are subscale and having to struggle with much higher raw material costs and supply chain costs and so forth.

Um, very good question. I I think, you know, China is I I've heard more in the last 30 days than having been there in the last couple of uh, 2 2 3 weeks ago. Uh, more discussion in country. Certainly than I hear out of country about the the government looking at over capacity, looking at older facilities is I look at the MDI situation in China. Most every facility in MDI in China is is I would is is not only very good technology but is also some of the the largest scale. Uh largest best integrated uh facilities that are integrated all the way up to uh you know, energy production, and handling production, coal production all the way down, uh, through the line. So I, I think that there will be a number of closures, uh, that will take place in the chemical industry over the next year or 2 or 3. I do not believe that that will be, uh, the case for MDI particularly, if you compare the competitiveness of those facilities, uh, with

Phil Lister: Mike, one area we are looking at is joint venture in China on MDI has been significantly under pressure. It could be that over the coming years, there could be some of the older MDI producing facilities that come out, but that will be over a number of years.

With with, uh, you know, 30 40, 50 year old, uh, facilities that are operating in Europe, uh, that are subscale and uh, and and having to struggle with much higher, raw material costs, and supply chain costs. And so forth. My 1 area, we are looking at is uh joint venture in China on PRP has been significantly Under Pressure. It could be that over the coming years. There could be some of the older MTB producing facilities that come out, but that would be over a number of years.

Various Analysts: Got it. Then, you know, maybe a longer-term question, Peter. It's, you know, we've been in this trough for quite some time, and maybe it takes a little bit longer to get to a higher EBITDA number for the company. But, you know, do you still feel good that there is, you know, pretty good upside in EBITDA to a mid-cycle, a longer term? How do you sort of think about getting there? What needs to happen?

Got it. And then, you know, maybe a longer-term question, Peter. It's, um, you know, we've been in this trough for quite some time.

For the for the company. But, you know do you still feel good that there is, you know, pretty good upside in in ebata to a mid-cycle I'm a longer term and and how do you sort of think about getting their what what needs to happen?

Peter Huntsman: I think that as you look at it, you always like to go back and look at past cycles and say that we are repeating. We certainly can repeat the cycles, but the reasoning that goes behind the cycles, whether it is an active warm, whether it is energy volatility, whether it is an implosion or an explosion, two different things. In the housing market, the number of unsold homes today are almost where they were in 2007 and 2008, but for completely different reasons. Therefore, I think that the outcome of this cycle, the timing of it, and the reasoning behind that outcome will be completely different. As you look at the other thing that is unique about this cycle is that we have got kind of three major economic blocks in the world, and all three of those are being hit for different reasons. The U.S.

Peter Huntsman: around, in my opinion, at least as it relates to this segment of the chemical industry, it is largely around interest rates and affordable housing. I believe that that is something that will be addressed, can be addressed, and it could happen very, I am not going to say overnight, but with interest rates, if you saw a meaningful change in interest rates, something that economists and the experts have now been talking about for what, three, four years. I think you could see quite a rapid recovery in North America. That would, I think, take us to normalized levels of MDI, again, not over the course of a quarter, but certainly over the course of a year or something where you are getting much closer to a normalized rate.

No, I I think that is, as you look at it, uh, you know, we always like to go back and and look at past cycles and say that we're repeating. Uh, we we certainly can can repeat the Cycles. But the reasoning that goes behind the cycle is uh, whether it's an act of War, whether its energy volatility, whether it's a, a an implosion or an explosion 2 different things, uh, in the housing market number of of of unsold homes today or almost where they were in 2007 and 8 but for completely different reasons. Uh, and therefore, I think that the, the outcome of this cycle uh, will the timing of it and the reasoning behind that outcome will be completely different. Uh, is is you look at the other thing that is unique about this cycle is that we've got kind of 3, major economic blocs in the world and all 3 of those are being hit for different reasons. The us around, in my opinion, at least as it relates to this segment of the chemical industry. It's it's all

Largely around interest rates and affordable housing. And I believe that that is something that that will be addressed can be addressed and and, and it could happen. Very, uh, I'm not going to say overnight, but if the interest rates, if you saw a meaningful change in interest rates, something that uh economists in quote, the experts have now been talking about for what 3 4 years uh,

Peter Huntsman: As I look to China, in the excess capacity they have in China and the ability to stimulate consumer spending in China, largely from the rebound of an implosion that took place in their housing markets, again, for completely different reasons than what we saw in the United States, what we are seeing in the United States. They are now in probably their fourth, going into their fifth year of what I would consider to be a lack of consumer confidence being driven largely by the implosion that you saw in housing value and overcapacity that was built and to some degree to try to counteract the economic benefits of that housing issue. I think longer term, China is going to continue to be a very competitive place. They have a very competitive energy. They have got a vibrant, well-educated workforce. I think that China recovers.

I think you could see a quite a rapid recovery in North America. Uh, and that would I think take us to normalized levels of MDI. Uh, again. Not over the course of a quarter, but certainly over the course of of a year or something where you you're getting much closer to a normalized rate. Uh, as I looked at China uh in the excess capacity, they have in China and the ability to to stimulate consumer spending in China, uh, largely from the rebound of, of of an implosion that took place of in their housing markets again for completely different reasons that we saw it in the United States of what we're seeing in the United States. Uh, they're now in probably their fourth going into their fifth year of of what I would consider to be, um, a lack of consumer confidence, being driven, largely by the, the, uh, implosion that you saw in housing value, uh, and over capacity, that was built and and to some degree to try to counteract the economic benefits of of,

Peter Huntsman: Europe is going to continue to be in an area of volatility, but it will find, Europe is just not going to disappear. It will find its areas of competitiveness, whether it is in aerospace, whether it is in electronics, whether it is in renewable energy and so forth. They will continue to benefit. There will be a lot of economic dislocation from Europe as they deindustrialize. A lot of that will end up in North America, the Middle East, or in China. There will be this reselling, but I do not see the tide coming back for the same reason at the same time in all regions.

Peter Huntsman: Of course, you will see a recovery, and you will see for new capacity to be built in this industry to feed future demands. You are going to have to see higher prices, higher margins, and that will precipitate a cycle and it is a cyclical return. That element of recovery has always been the same in past recoveries as to the reason why you see the recovery. That was a long rambling answer, but it was, yes, I believe that there will be a recovery. I think that we will get back to those normalized levels, probably in the U.S. and in China sooner than in Europe. I see no reason why we would not be able to do that. When we do that, we will have an even more competitive cost structure that will return even more to the bottom line.

Of that housing uh issue. Um I I think longer term China is going to continue to be a very competitive place. I have a very competitive energy. They've got a vibrant work, well-educated Workforce and, uh, I I think that China recovers, uh, Europe is, is going to continue to be in an area of volatility, but it will find like Europe's just not going to disappear, it will find its areas of competitiveness and whether it's in Aerospace, whether it's an Electronics, whether it's in, uh, you know, renewable energy and so forth. And, uh, you know, they'll, they'll continue to to benefit, uh, they'll be a lot of of economic dislocation from Europe as a de-industrialized. A lot of that will end up in North America, the Middle East, or in China. Um, and so, they'll, they'll be this resetting, but I don't I don't see the tide coming back to the same for the same reason, at the same time in all regions, but of course, you will see a recovery. Uh, and you will see, uh, for new capacity to be built in this industry.

To feed future demand, you're going to have to see higher prices, higher margins, and that will precipitate a uh a a, a cycle and and it says cyclical return. And that element of recovery is has, has always been the same in past, recoveries, this is the reason why you see the recovery. So, sorry, that was a long rambling answer but it, but it was, it was, uh, you know, I yes, I believe that there will be a recovery. I think that we'll get back to those normalized levels. Uh, probably in the US and in China soon.

Peter Huntsman: We have learned how to operate the company at a lower cost, with lower inventory, stronger working capital discipline. We have got further downstream capacities that are filling out in Geismar, Louisiana, new capacities and catalysts and so forth that have been built and completed and now going into market and performance products and chip cleaning technology and so forth and performance products coming into the market. Not only will we see the recovery, but we will also see some new opportunities from past investments to capitalize on that.

Some new opportunities, uh, from past investments to capitalize on that.

Ivan Marcuse: The next question comes from the line of Hassan Ahmed with Alembic Global. Please proceed.

Phil Lister: Morning, Peter and Phil. I just wanted to stick to the theme of a recovery, however far it is. In your prepared remarks on the polyurethanes side of things, you mentioned that sequentially volumes were up around 3%. Typically, Q1 to Q2, you see an 8% to 10% sort of uptake in volume. I am just trying to get a sense of how far below normal volume levels are we, just to get a better sense of as and when that recovery happens, how much higher these volumes can actually go.

The next question comes from the line of Hassan Ahmed with Olympic Global, please proceed.

However, far it is, um, in your prepared remarks. On the polyurethane side of things, you mentioned that sequentially volumes were up um, around 3%, and typically you want to Q2 you see an 8 to 10% uh sort of update in volume. So I'm just trying to get a sense of how far below normal volume levels, are we you know just to get a better sense of as and when that recovery happens you know how much higher these volumes can actually go?

Peter Huntsman: I think that for the most part, when we look to, when we take out kind of one-time contracts and business that we won in the same quarter, you are probably looking at somewhere between 5% and 8% that I would say is kind of missing in the numbers. That typically is around housing and construction. We saw an incredibly anemic housing and construction market this year. I do not think we have seen anything like this since COVID and since the Great Recession before that. I think there is a great deal of uncertainty around people wanting to commit to what is usually the largest purchase in their lifetime during times of market volatility and uncertainty, and also with higher interest rates. I am very hopeful that those markets will recover early this next year and will be in a much stronger position this next year.

Yeah, I think that for the most part, uh, you know, when when we look to, when we take out kind of 1 time, uh, contracts and, and and business that we want in the second quarter, you're probably looking at somewhere between 5 and 8%. Uh, the the the I would say is is kind of missing in the numbers and that typically is around housing and construction. Uh, we saw an incredibly anemic, uh, housing and construction Market. Uh, this year, I don't think we've seen anything like this since, uh, since Co and since the Great Recession before that,

Peter Huntsman: We definitely, the single biggest impact in the second quarter that I think, I am going to say surprised us because we were talking about this on our last call, but was the utter lack of seasonality that we typically see at this time around construction.

Phil Lister: Understood. Very helpful. As a follow-up, I mean, again, in the prepared remarks for polyurethanes, you guys talked about how through the course of the quarter, you saw a more intense competitive environment in Europe. I guess you mentioned driven by domestic producers. Can you just expand on that? Do you see any sort of resolution around that in the near term as well?

That, uh, so, there's I think there's a great deal of uncertainty around people wanting to commit, uh, to what is usually, the largest purchase in their lifetime, uh, during times of, of Market, volatility and uncertainty and also with higher interest rates. So, um, I yeah, I'm very hopeful that those markets will recover, uh, early this next year and and, uh, we'll be in a much stronger position this next year. Uh, but, but we definitely the single biggest impact in the second quarter. That was, uh, that I think I'm going to say surprises because we were talking about this on our last call, but was was the utter lack of of, uh, seasonality that we typically see, at this time around Construction

Understood very helpful and as a follow-up. Um, I mean again in the prepared remarks for polyurethanes, you guys talked about um, you know, how through the course of the quarter, you saw a more intense competitive environment in Europe and I guess you mentioned, uh, driven by domestic producers. So can you just expand on that? And do you see any sort of resolution around that, uh, in the near term as well?

Peter Huntsman: Unfortunately, I don't see a great deal of resolution around that. We pushed very aggressively in Q2, as we did in Q1, as we did in the quarter previous to that, for better, higher pricing margin expansion in Europe. I believe that, again, I don't know what the decision of our competitors are, but it seems like people are putting volume over value. They're moving volume at any price sort of a thing. Surprisingly, in Europe, that is today our highest cost urethane production in the world and our lowest value of MDI in the world. So you kind of got both sides are hitting you.

Uh, unfortunately, I don't see a great deal of resolution around that we, we push very aggressively in the second quarter as we did in the first quarter as we did in the quarter previous to that, uh, for for better higher pricing, margin expansion in Europe. Uh, and uh, the, the I, I believe that, uh, I can't again, I don't know what the decision of our competitors are, but it seems like people are are

Phil Lister: What do we do for some? We continue to focus on the announcements we made, getting our cost base correct, and all of the activities that we are doing, including closing some of our facilities there and then work within the competitive environment that is existing.

Peter Huntsman: Yeah, 85% to 90% of our cost reductions right now across the company are focused in this market.

Uh, putting volume over value and, you know, the moving volume, it it any price sort of a thing. So surprisingly in Europe, that is uh, today, our highest cost urethane production in the world and our lowest value of MDI in the world. Uh, so you kind of got both both sides are are hitting you. So what do we do for some? We continue to focus on the announcements. We made, uh, getting our cost base, correct. And all of the activities that we're we're doing, including closing some of our, some of our, some of our facilities there, and then work within the competitive environment. That's existing. Yeah, 859% of our cost. Reductions right now across the country are focused uh, within this Market.

Ivan Marcuse: The next question comes from the line of Aleksey Yefremov with KeyBanc Capital Markets. Please proceed.

The next question comes from the line of Alexey. Yes, with Tan Capital Markets, please proceed.

Phil Lister: Good morning. Peter, I was hoping you could deconstruct for us polyurethanes segment price declines of 5% year over year this quarter. You just talked about Europe, but was this the sole reason for this decline? Were other regions particularly bad or good? Also, from the perspective of just polymeric MDI versus systems, were these pieces better or worse than the 5%?

Good morning. Uh Peter. I was hoping you could deconstruct for us polyurethanes uh segment price declines or 5% year-over-year this quarter. Uh I mean you just talked about Europe but uh was this uh the sole reason for this. Decline were other regions particularly bad or good. And also from the perspective of, uh, just polymeric MDI versus systems, uh, uh, or or these pieces better or worse than the 5%,

Peter Huntsman: Yeah, I think that we did see a price fall from the first going into the second quarter. We started off the second quarter, the beginning of the second quarter, particularly in China, where we had gone from about 18,000, 18,500 RMB down to about 15,000 RMB. So, what is that? A 20%, 15%, 20% drop in price from the end of the first quarter going into the beginning of the second quarter. We came out of that quarter with stabilization, a bit of an increase through the quarter and stabilization as we look into the third quarter. I think that, we are hoping that we will see some price increases in China with that stabilization getting better. In the U.S. and in Europe, we are just seeing some very competitive pricing dynamics in place. A lot of people chasing little volume.

Phil Lister: Aleksey Yefremov, if you are looking at the 5% year on year, which I think you are in our press release on polyurethanes, you go back to this time last year, it was about 18,000 RMB for polymeric, and today we are at about that sort of 15,500, 16,000. So you have seen a drop of 10% to 15%. It is mostly in the polymeric area. You would have had some pressure on system prices, some on MDI variants, but in general, the move that you have seen is polymeric MDI related.

The end of the first quarter going into the beginning of the second quarter. We came out of that quarter, uh, with stabilization, uh, a bit of an increase through the quarter and stabilization, as we look into the third quarter, uh, I think that, you know, we're hoping that we'll see some price increases in China, uh, with that stabilization, uh, getting better, uh, in the US. And in, in, uh, in Europe. We're just seeing, uh, you know, some some, uh, very competitive pricing. Uh, Dynamics are a place, a lot of people chasing, uh, little volume.

Alexa if you're looking at the the 5% year-on-year which I think you are in our press release on polyurethanes uh you go back to this time last year it was about 18,000 R&B for polymeric and today we're at about that sort of 15 and a half 16,000. So you've seen a drop of 10 to 15%. So it's mostly in the polymeric area. You would have had some pressure on, uh, system prices, uh, some on, uh, MDI variants but in in general the the, the the, the, the the move that you've seen is, it's, it's polymeric MDI related.

Various Analysts: Peter, in the past, it's been hard to move U.S. MDI demand offshore, or at least it could be sort of terrifying in repercussions. Do you know if you've got an obvious view of how you're seeing any demand maybe move to Mexico or Canada, or it's been pretty steady?

And and here you're going to ask is that. It's hard to uh you ask him the idea to me and the offshore or at least it could be Earth tariff related, roofer questions. Um, you don't have to do this on this year. Have you seen? We need to me and maybe move to Mexico, or Canada, or or it's been pretty steady.

Phil Lister: Yeah, so Aleksey Yefremov, I think you are asking about the trade flows there and whether some product instead of coming into the United States moves into Mexico or into Canada. Look, I think we had said if you looked through the first of the six months of the year, clearly the imports coming into the U.S. are considerably lower. There will be some which would have gone into the Canadian business, into the lumber business there, a little bit into Mexico. Mexico is not an enormous market here at all, and mainly driven by automotive and furniture, actually, where in general you have to spec in. As we said in our earlier remarks, what we have been watching is that whilst the imports have dropped off from China, the European imports into the U.S. have actually increased in that time.

Phil Lister: That coupled with a lower demand environment, those three elements combined have led to a pricing environment which is relatively stable, rather than, say, the increases that I think the industry had hoped for.

Yeah, so Alexa, I think you're asking about the trade flows there and whether some product, uh, instead of coming into the United States moves into to Mexico or into into, uh, into Canada. Um, look, I I I think we'd said uh yeah, I think we'd said if you if you look through the first sort of 6 months of the year, um clearly the Imports coming into the US are considerably lower, there'll be some, which would have gone into the Canadian business into the lumber business there. Um, a little bit into Mexico, Mexico is not an enormous Market here at all and, and mainly driven by automotive and Furniture. Actually, where in general, you have to to, uh, to spec in, um, as we said in our earlier remarks, what we've been watching is that whilst the Imports have dropped off from from, from, from China. Um, the European Imports into the US have actually increased in that time and that coupled with a lower demand environment. Those 3 elements uh combined have led to a price.

...environment which is relatively stable rather than, say, the increase that I think, uh, the industry had hopes for.

Peter Huntsman: Yeah, Aleksey Yefremov, my apologies. Your call was kind of breaking in and out, and Phil coming from the U.K. is used to listening to Scots and Irish and so forth, so he's better at stuff like this.

Phil Lister: Thank you very much.

Yeah, I like to say my apologies, I I, your your call was kind of breaking in and out and, and, uh, Phil coming from the UK is, uh, used to, uh, listening to Scott and Irish and so forth. So he's better at stuff like this. I am. Thank you very much.

Ivan Marcuse: The next question comes from the line of Arun Viswanathan with RBC Capital Markets. Please proceed.

The next question comes from the line of Aaron viswanathan with RBC Capital markets, please proceed.

Various Analysts: Great, thanks for taking my question. I just wanted to ask about two things. First off, I understand that, you know, obviously Huntsman, it's not the view that the world needs another MDI plant, especially under your leadership, Peter, but I guess others may not necessarily feel that way. Is there anything else that, you know, potentially, what's kind of the pushing point when others kind of get to the same conclusion that you do? Maybe if you could frame that in, you know, whether it be cost per ton or pricing or anything like that. Similarly, on epoxies in your advanced materials business, there's been some exits by others in the BLR market. Does that affect your sourcing at all, or what can you share there? Thanks.

Peter Huntsman: Well, I think that on the BLR side, I will take that first. On the BLR side, I think that we have got plenty of suppliers. We have seen some higher cost facilities that have cut back or slowed down. There is plenty of BLR on the market, and I would not assume that that is going to impact our earnings on our advanced materials at all, the few that have exited. On MDI capacity, I simply cannot imagine what takes place in a boardroom when people decide they are going to take $1 billion, $2 billion and invest it in something that is going to take five, seven years to build in a product that we are swimming in today.

Great, thanks for taking my question. Um, just wanted to ask about 2 things, so first off, uh, yeah, I I understand that, um, you know, obviously uh, Huntsman it's not the view that the world needs, another MDI plant, uh, especially under your leadership Peter, but, um, I guess others may not necessarily feel that way. Um, is there anything else that, you know, potentially what what's kind of the, the pushing point, when, when others kind of get to the same conclusion that you do and, um, maybe if you could frame that and you know, whether it be cost per ton or or pricing, or anything like that? And then similarly on epoxies, um, in your Advanced Materials business. There's been some exits by uh, others in the, uh, blr Market. Um, does that affect your sourcing at all? Or, um, what can you share their thanks.

Yeah, I I well, I think that, uh, on, on the blr side, I'll take that first on the blr side. I think that we're, we've got plenty of suppliers. Uh, you know, we have seen some, some higher cost facilities that have that have cut back or slowed down that there's plenty of blr on the market. And I wouldn't, I wouldn't be, uh, I wouldn't assume that that's going to impact our earnings on that. Our Advanced Materials at all, uh, the the few that have exited on

Peter Huntsman: I do not know, maybe they got a crystal ball as to where we are going to be in the decade from now, but I guess I could see the rationale that the Chinese have had over the last couple of decades as they have wanted to become more independent and self-sufficient. I get that, but I look at the growth rates and so forth across Europe.

Phil Lister: in North America and, in even China today. I just don't see any justification for that. So I can't speak to the rationale that we go into a decision like that. There really nothing as a reality. None of the Western manufacturers, as far as we know, have announced any new capacity, major capacity additions and major plants. There may have been some debuggle making, but nothing, nothing from a major new plant perspective.

I get that. But I look at the growth rates and so forth, across Europe, and North America, and, and even China today, I I I just don't see any justification for that. So I I can't, uh, speak to the rationale that we go into a decision like that. I think there's a reality. None of the western manufacturers. As far as we know, have have have announced any uh new capacity, major capacity additions and major plans. There may have been some debuff making but nothing nothing from a major new plan perspective.

Joel (Operator): Right. But I guess I'm just curious, would they and yourselves, get to a place here where that utilization rate remaining in the low 80s or high 70s is just not acceptable and would force some closures? Do you foresee that happening? And, you know, would it make sense for you guys as well? I appear not, I guess not just given your position on the cost curve, but do you foresee any supply takeout materializing that way?

Right. But I guess I'm just curious. Um, would they and yourselves? Uh, get to a a place here, where, um, you know that utilization rate and remaining in the low 80s or high 70s is is just not acceptable and, um, would force some closures, do you see for see that happening and and um, you know, would it make sense for for you guys as well? Uh, I I appear not. I guess not just given your position on the cost curve but um, do you do you foresee any any um Supply take out uh, materializing. That way.

Phil Lister: Yeah, I would, I believe that there are some very high-cost facilities in Europe, but that's just from information that I read publicly. I would have thought that would have happened before now, but it hasn't. Chemical facilities by and large are very expensive to shut down. In Europe, it's very problematic when you have to deal with government authorities and so forth. I was going to get into my own experience, but I won't, we don't have time. But particularly in Europe, it's expensive and particularly in sites where you've got four or five other chemical companies that are dependent on your operations. You're dependent on their operations. You may be able to or want to shut down, but you've got 15, 20-year supply agreements and offtake agreements and shared site costs and so forth.

Yeah, I I would I I believe that there are some very high cost facilities in Europe, but you know that's just from the information that I read publicly I would have thought that would have happened before now, but uh, if it hasn't it chemical facilities by and large are very expensive uh to shut down and Europe. It's very problematic when you have to deal with government authorities and so forth. Uh,

Phil Lister: So yeah, a lot of these, it's a tough and very expensive decision to just simply walk away. But I think that you're, I think you're at that point where I can't imagine there are not companies today that are looking at those economics and decisions.

I was going to get into my own experience but I won't we don't have time. Uh, but it it it's, uh, it particularly in Europe. It's it's expensive and particularly in sites where you've got, uh, 4 or 5 other chemical companies that are dependent on your operations. You're dependent on their operations, and you may be able to, or want to shut down, but you've got 15, 20 years, Supply agreements and and offtake agreements. And and shared site costs and so forth. Uh, so yeah, a lot of these you it's it's it's a tough and very expensive decision to just simply walk away, but I I think that you're I think you're at that point where I can't can't imagine they're not companies today that are looking at those economics in decisions.

Conference Center Specialist: The next question comes from the line of Mike Harrison with Seaport Research Partners. Please proceed.

The next question comes from the line of Mike Harrison with Seaport Research Partners. Please proceed.

Rachel Smith: Hi, good morning. I wanted to see if you could give us some color, Peter, on the comment that we are seeing European MDI being imported into North American markets. Can you just explain what is driving that and do you expect that to persist into the second half?

Hi, good morning. I wanted to see if you could give us some color, Peter, on the comments that we're seeing regarding European MDI being imported into North American markets. Can you just explain what's driving that, and do you expect that to persist into the second half?

Phil Lister: have got to be honest with you. I cannot imagine in my wildest dreams why somebody would do that. But again, I do not sit in the boardroom. I do not say I am mocking the question. It is a very good question. I cannot imagine you are taking some of the most high cost MDI producing in the world and shipping it, paying the cost of duties and everything else. I do not know. I do not know why somebody would do that, but it has been done. So that is the market.

Uh, I've got to be honest with you. I can't imagine in my wildest dreams why somebody would do that. But again, I don't sit in the boardroom of... I, I don't see that. Mocking the question, it's a very good question. I can't imagine that you're taking, uh, some of the most high-cost MDI producing materials in the world and shipping it, uh, paying the cost of duties.

And everything else? I don't know. Uh, I don't know why somebody would do that, but it's being done, so.

Rachel Smith: No, I actually print out the printed remarks and I wrote down WTF next to that comment that you made in the remarks there.

That's the market.

Phil Lister: Yeah, but I've written that, I've written that more than, I've written that more than once. So that's.

No, I I actually print out the printed remarks and I wrote down WTS next to that, uh, comment that you made in the remarks there. Um, yeah, I've, I've written that, I've written that more than, I've written that more than once. So that

Rachel Smith: My other question is just on the MTBE joint venture. You said there was a loss in the second quarter. Is any improvement expected to materialize in the second half? Maybe just give some color on what you are seeing in terms of MTBE margin dynamics. Thanks.

Uh, my other question is just on the MTBE joint venture. You said there was a loss in the second quarter. Is any improvement expected to materialize in the second half? Maybe just give some color on what you're seeing in terms of MTBE margin dynamics. Thanks.

Phil Lister: I think typically MTBE does its best in the driving seasons, which is usually the end of Q1, Q2, you know, through Q3. Gasoline blends, octane values, and the cost of raw materials is, and again, I think I have a very good knowledge of MTBE in markets where they are going for the next 24 to 48 hours. I would say between now and the end of the year, it is going to be a struggle to see it get much better.

Uh I I think typically mtbe does its best in the driving Seasons which is usually the end of the first quarter second quarter, you know, through the third quarter um and gasoline Blends octane values and the cost of raw materials is is and again I I think I have a very good knowledge of of MTV and markets where they're going for the next 24 to 48 hours. Um I would say between now and the end of the year it it's going to be a struggle to see it. Get much better.

Conference Center Specialist: The next question comes from the line of Lawrence Alexander with Jefferies. Please proceed.

Ivan Marcuse: Hi, yeah, this is Kevin Esluck on for Lawrence. You guys touched on the rate cycle a bit, but I just wanted to delve into that a little bit. I guess just wondering, from an amount of rate cuts, how much do you expect it would take to basically turn the construction and consumer durable end markets a bit? Would you say it would take 75 basis points in 2025, maybe 75 in the first half of 2026, maybe causing some green shoots in construction by the back half of 2026, and then consumer durables at 2027 at best?

The next question comes from the line of Lawrence Alexander with Jefferies. Please proceed.

Hi, yeah. Yeah, this is Kevin suck on for Lawrence. Uh so you guys touched on uh the right cycle a bit. But I just wanted to delve into that a little bit. I guess just wondering like from from, you know, from an amount of rate Cuts. I guess how much do you expect? It would take to basically turn the construction and consumer durable and markets a bit like, so would you say like maybe it would take 75 basis points in 2025 would be 75 in the first half of 2026?

Customer doubles at 2027 at best.

Phil Lister: Monetary policies really are not my area of expertise. I will probably defer to Phil Lister on that, but I would just say that it is probably two issues. It is not just how much is taking place, but also the direction in which it appears to be going. If you see a small rate cut of 25 bps, I am not sure that is going to catalyze the economy, but if that is going to be the first of, you know, two or three expected rate cuts coming, I think that that could be a very substantial catalyst. At this point, there is just not a whole lot of visibility that the Fed is giving. A key impact that we always watch is, you have got the Fed funds, right? But what is that doing for longer term yields?

Uh, monetary policies really are are not my area of expertise. I'll probably defer to Phil on that, but I would just say that it's probably, uh, 2 issues. It's not just um, it, it's not just how much is taking place, but also the direction in, which it appears to be going. If, if you see a small rate cut of of 25 bits, I'm not sure that's going to catalyze the economy. But if that's going to be the first of of, you know, 2 or 3 expected rate Cuts, uh, coming, I think that that could be, uh, a very, uh, substantial Catalyst. Uh, but at this point, I

Phil Lister: Then ultimately, how is that feeding into the mortgage rates themselves? We have seen a bit of a disconnect, as we know, between where 10-year yields currently sit. So we were looking at all of those factors. They all need to come down and then get some greater stimulation in construction and move from there.

That there's just not a whole lot of of, uh, visibility uh, that, that, uh, that the feds giving, and, like a chi, chi, chi, chi impact. That, we, we always watch is, um, you've got the FED funds rate, but what's that doing for, for longer term yields? And then ultimately, how is that feeding into the into the mortgage rates than than, than themselves? And we've seen a bit of a disconnect as we know, um, between where 10 year yields currently currently sit. So, we we, we, we're looking at all of those factors. They all need to come down and, uh, and then get some greater, um, stimulation in in construction. And, and, uh, and and, and, and move from there.

Rachel Smith: Okay, great. Thank you.

Okay, great. Thank you.

Phil Lister: Thank you. I think we're getting near the top of the hour, so why don't we take one more question?

Uh, thank you, and uh, operator. I think we're getting near the top of the hour, so why don't we take one more question?

Conference Center Specialist: Yes, sir. The next question comes from the line of Arun Viswanathan with J.P. Morgan. Please proceed.

Yes, sir.

The next question comes from the line of Aaron Rosenthal with JP Morgan. Please proceed.

Ivan Marcuse: Hey, good morning. Thank you for the time. Just wanted to quickly touch on the balance sheet again. It looks like there was an additional funding on the revolver during the quarter. Despite their cash flow result and acknowledging the commentary thus far on the dividend and balance sheet, is it fair to assume that any potential cash shortfall in the second half of the year would be plugged by additional revolver borrowings, or are there any other considerations currently being entertained, perhaps issuing new debt to shore up liquidity at some point this year?

Phil Lister: Yeah, Aaron Heitzfeld, thanks for the question. Thanks for being on the call. No, we are not looking at any new debt issuings in the second half of the year. I think you are probably aware of where we sit from a maturity standpoint, which is our revolver. It matures in May of 2027. We have got our securitization facilities as well. Then our longer term bond maturities of 2029, 2031, 2034, which is helpful, frankly, in the current trough environments overall. Look, on a cash flow basis, last 12 months, we generated $150 million. We did bring in $40 million from our Chinese joint venture liquidation. So, theoretically, over the last 12 months, we covered the $170 million of dividend. We will focus on our cash generating activities in the second half of the year here and manage everything accordingly.

Hey good morning and thank you for the time. Um just wanted to quickly touch on the balance sheet again uh yeah I guess it looks like there was a additional funding on the revolver during the quarter. I guess despite their cash flow results in you know the the commentary thus far and the dividend uh and and the balance sheet I guess maybe is it just fair to assume that any any potential cash shortfall in the second half of the year uh would be plugged by additional revolver borrowings or are there any other considerations uh I guess currently being entertained perhaps issuing new debt to shore of liquidity at some point this year.

Yeah, Aaron Heights, Felder. Thanks for the question. Thanks for being on the, on the, on the call. Now, we're not looking at any new debt, uh, debt issues in the, in the second half of the year. Uh, I think you're probably aware of where we sit from a maturity standpoint, which is our revolver matures in May of 2027, we've got our securitization facilities as well and then our longer term bond. Maturities are 293134 uh which is which is helpful frankly. Uh in the current trough uh environment overall. Uh look I'm I'm a cash flow uh basis. Uh last 12 months we generated 150 million. We did.

Phil Lister: We recognize where we are from a credit rating perspective, and we will manage within the sub-investment grade rating category that we are.

To bring in 40 million from our, uh, Chinese joint venture liquidation. So um, theoretically over the last 12 months, we covered the 170 million of dividend, we'll focus on our cash generating activities in the in the second half of the, the year here and, and manage everything, uh, everything accordingly. Uh, we recognize where we are from a, from a credit rating, uh, perspective. And we'll manage within the sub investment grade. Uh, grade uh, uh, rating category that we, that we are.

Ivan Marcuse: Thank you.

Thank you.

Phil Lister: Thank you.

Thank you.

Joel (Operator): All right, thanks, Joel. We can end the call now.

All right. Thanks Joe.

We can end the call now.

Conference Center Specialist: Thank you. That concludes today's conference. You may disconnect your lines at this time. Enjoy the rest of your day.

Thank you. This concludes today's conference. You may disconnect your lines at this time.

Enjoy the rest of your day.