July 31, 2020

LyondellBasell Propylene Oxide Results for Q2

Intermediates & Derivatives (I&D)– Our I&D segment produces and markets Propylene Oxide & Derivatives, Oxyfuels & Related Products and Intermediate Chemicals, such as styrene monomer, acetyls, ethylene oxide and ethylene glycol.

Three months ended June 30, 2020 versus three months ended March 31, 2020 – EBITDA decreased $160 million versus the first quarter 2020, excluding a favorable variance of $58 million due to LCM inventory charges.  Second quarter 2020 Propylene Oxide & Derivatives results decreased about $55 million due to lower volumes driven by reduced demand from automotive, construction and furniture end markets.  Intermediate Chemicals results were relatively unchanged.  Oxyfuels & Related Products results decreased approximately $95 million with oxyfuels margins compressed by lower gasoline prices and volume declines due to lower demand for automotive fuels and isobutylene.

Three months ended June 30, 2020 versus three months ended June 30, 2019 – EBITDA decreased $327 million versus the second quarter 2019, excluding an unfavorable variance of $20 million due to second quarter 2020 LCM inventory charges.  Compared with the prior period, Propylene Oxide & Derivatives results decreased approximately $40 million driven by lower volumes due to reduced demand and lower margins.  Intermediate Chemicals results decreased $130 million.  Margin declined, primarily in styrene, and volumes were lower due to planned maintenance and reduced demand.  Oxyfuels & Related Products results decreased about $145 million driven by lower margins due to lower gasoline prices.  Volume declines due to reduced demand were muted by impacts from a third party terminal incident that reduced volumes during the first half of 2019.

https://lyondellbasell.mediaroom.com/index.php?s=43&item=1334

July 30, 2020

Tempur Sealy Results

-Net Sales Decreased 8%, U.S. Sales Increased 2%

-Targeting 25% Net Sales Increase in Third Quarter 2020

-Leverage Ratio Lowest in Tempur Sealy History

PR Newswire

LEXINGTON, Ky., July 30, 2020 /PRNewswire/ — Tempur Sealy International, Inc. (TPX) announced financial results for the second quarter ended June 30, 2020.

SECOND QUARTER 2020 FINANCIAL SUMMARY

• Total net sales decreased 8.0% to $665.2 million as compared to $722.8 million in the second quarter of 2019. On a constant currency basis⁽¹⁾, total net sales decreased 7.3%, with a decrease of 2.9% in the North America business segment and a decrease of 26.9% in the International business segment.
• Gross margin was 40.0% as compared to 43.4% in the second quarter of 2019. Adjusted gross margin⁽¹⁾ was 40.6% in the second quarter of 2020. There were no adjustments to gross margin in the second quarter of 2019.
• Operating income decreased 34.1% to $53.4 million as compared to $81.0 million in the second quarter of 2019. Adjusted operating income⁽¹⁾ decreased 16.5% to $70.0 million as compared to $83.8 million in the second quarter of 2019. Operating income and adjusted operating income⁽¹⁾ in the second quarter of 2020 included $7.9 million of costs associated with temporarily closed company-owned retail stores and sales force retention costs as a result of the novel coronavirus (“COVID-19 charges”).
• Net income decreased 44.7% to $23.0 million as compared to $41.6 million in the second quarter of 2019. Adjusted net income⁽¹⁾ decreased 20.8% to $35.1 million as compared to $44.3 million in the second quarter of 2019.
• Earnings before interest, tax, depreciation and amortization (“EBITDA”)⁽¹⁾ decreased 21.8% to $85.2 million as compared to $109.0 million in the second quarter of 2019. Adjusted EBITDA (including COVID-19 charges)⁽¹⁾ decreased 10.0% to $101.7 million and adjusted EBITDA per credit facility⁽¹⁾ decreased 3.0% to $109.6 million as compared to $113.0 million in the second quarter of 2019.
• Adjusted EBITDA per credit facility⁽¹⁾ excluded $24.5 million of asset impairments, incremental operating costs due to the global pandemic, COVID-19 charges and other items in the second quarter of 2020.
• Earnings per diluted share (“EPS”) decreased 40.5% to $0.44 as compared to $0.74 in the second quarter of 2019. Adjusted EPS⁽¹⁾ decreased 13.9% to $0.68 as compared to $0.79 in the second quarter of 2019. Adjusted EPS⁽¹⁾ included $0.11 of COVID-19 charges in the second quarter of 2020.
• For the trailing twelve months ended June 30, 2020, leverage based on the ratio of consolidated indebtedness less netted cash⁽¹⁾ to Adjusted EBITDA per credit facility⁽¹⁾ was 2.83 times as compared to 3.65 times in the corresponding prior year period.
• Net cash provided by operating activities increased to a record $155.4 million as compared to $41.3 million in the second quarter of 2019.

Company Chairman and CEO Scott Thompson commented, “It was definitely a quarter of lows and highs, ending clearly on a high note for the industry and our business. Sales trends through the quarter accelerated each month and have continued to accelerate into July unabated. We believe the category is benefiting from a shift in consumer spend of discretionary dollars into the home category in which our products and brands are well-aligned to meet those consumer needs. We are currently experiencing tremendous order volume in the U.S. that is broad-based with growth across both Tempur and Sealy brands. In fact, our sales have been constrained by our Sealy manufacturing capacity and our suppliers’ capacity to meet this increased demand. Over the past five years, we have worked diligently to strengthen the foundation of our company, and we are now benefiting from our powerful omni-channel presence and strong competitive position in the industry. While a level of uncertainty remains, we expect the industry tailwinds and our sales momentum to continue.”

Business Segment Highlights

The Company’s business segments include North America and International. Corporate operating expenses are not included in either of the business segments and are presented separately as a reconciling item to consolidated results.

North America net sales decreased 3.0% to $570.5 million as compared to $588.1 million in the second quarter of 2019. On a constant currency basis⁽¹⁾, North America net sales decreased 2.9% as compared to the second quarter of 2019. Gross margin was 37.9% as compared to 40.8% in the second quarter of 2019. Adjusted gross margin⁽¹⁾ was 38.6% as compared to 40.8% in the second quarter of 2019. Operating margin was 12.2% as compared to 13.6% in the second quarter of 2019. Adjusted operating margin⁽¹⁾ was 14.3% as compared to 13.9% in the second quarter of 2019. Operating income and adjusted operating income⁽¹⁾ included $6.0 million of COVID-19 charges in the second quarter of 2020.

North America net sales through the wholesale channel decreased $33.9 million, or 6.4%, to $494.6 million as compared to the second quarter of 2019. North America net sales through the direct channel increased $16.3 million, or 27.3%, to $75.9 million, primarily driven by an increase of more than 140% in web sales as compared to the second quarter of 2019.

North America adjusted gross margin⁽¹⁾ declined 220 basis points as compared to the second quarter of 2019. The decline was primarily driven by product and brand mix, partially offset by decreased floor model expenses and lower commodity costs. North America adjusted operating margin⁽¹⁾ improved 40 basis points as compared to the second quarter of 2019. The improvement was primarily driven by the lower operating expenses as a result of cost actions in the quarter, partially offset by the decline in gross margin and COVID-19 charges.

International net sales decreased 29.7% to $94.7 million as compared to $134.7 million in the second quarter of 2019. On a constant currency basis⁽¹⁾, International net sales decreased 26.9% as compared to the second quarter of 2019. Gross margin was 52.5% as compared to 54.5% in the second quarter of 2019. Adjusted gross margin⁽¹⁾ was 53.0% as compared to 54.5% in the second quarter of 2019. Operating margin was 10.1% as compared to 20.3% in the second quarter of 2019. Adjusted operating margin⁽¹⁾ was 14.6% in the second quarter of 2020. There were no adjustments to operating margin in the second quarter of 2019.  Operating income and adjusted operating income⁽¹⁾ included $1.9 million of COVID-19 charges in the second quarter of 2020.

International net sales through the wholesale channel decreased $34.6 million, or 33.4%, to $69.1 million as compared to the second quarter of 2019. International net sales through the direct channel decreased $5.4 million, or 17.4%, to $25.6 million as compared to the second quarter of 2019.

International adjusted gross margin⁽¹⁾ declined 150 basis points as compared to the second quarter of 2019. The decline was primarily driven by fixed cost deleverage on lower unit volumes and decreased royalties, partially offset by favorable country mix. International adjusted operating margin⁽¹⁾ declined 570 basis points as compared to the second quarter of 2019. The decline was primarily driven by fixed cost deleverage on operating expenses, increased bad debt expense, COVID-19 charges and the decline in gross margin. These declines were partially offset by the performance of the Asia joint venture.

Corporate operating expense decreased to $25.6 million as compared to $26.5 million in the second quarter of 2019. Corporate adjusted operating expense⁽¹⁾ was $25.4 million in the second quarter of 2019. There were no adjustments to operating expense in the second quarter of 2020.

The Company ended the second quarter of 2020 with total debt of $1.8 billion and consolidated indebtedness less netted cash⁽¹⁾ of $1.6 billion. Leverage based on the ratio of consolidated indebtedness less netted cash⁽¹⁾ to adjusted EBITDA per credit facility⁽¹⁾ was 2.83 times for the trailing twelve months ended June 30, 2020, the lowest in Tempur Sealy history.

Company Chairman and CEO Scott Thompson commented, “We are lowering our target leverage ratio for the second time in the last 12 months. Our new revised target range is 2.0 to 3.0 times. The reduction in our leverage target is not due to any market concerns; it is a strategic move to provide optionality and lower market volatility. We have always seen our financial strength as a competitive advantage and part of our long-term strategy for the Company.”

Consolidated net income decreased 44.7% to $23.0 million as compared to $41.6 million in the second quarter of 2019. Adjusted net income⁽¹⁾ decreased 20.8% to $35.1 million as compared to $44.3 million in the second quarter of 2019. EPS decreased 40.5% to $0.44 as compared to $0.74 in the second quarter of 2019. Adjusted EPS⁽¹⁾, which included $0.11 of COVID-19 charges, decreased 13.9% to $0.68 as compared to $0.79 in the second quarter of 2019.

(1) This is a non-GAAP financial measure. Please refer to “Non-GAAP Financial Measures and Constant Currency Information” below.

Business Update

The Company continues to study, respond and optimize its operations related to the challenges from the COVID-19 crisis. The Company has taken, and continues to take precautionary measures to mitigate health risks during the evolving situation resulting from COVID-19.

The Company experienced a major reduction in total net sales when COVID-19 began materially impacting our North American business in mid-March. Order trends reached their lowest point in the second quarter when they were down 80% for a few days in early April and began to improve thereafter, with orders down approximately 55% for the full month of April as compared to the same month in 2019. The Company experienced significant and accelerating improvement in order trends throughout the remainder of the quarter, and the Company provided market updates in May and June as orders improved from previous expectations. This improvement was primarily due to the reopening of brick-and-mortar stores, the acceleration of e-commerce business trends, and a shift in consumer spending habits towards in-home purchases, including bedding products.

This unexpected and rapid increase in demand for bedding products has challenged the entire bedding industry and supply chain including the Company. The broad-based increase in demand coupled with supply chain constraints has resulted in longer order to delivery times for Sealy products in the second quarter and continue July to-date. The Tempur-Pedic manufacturing process is not as impacted by the current supply chain constraints as it is less labor-dependent and has fewer components than the Sealy process. The Company is in the process of ramping global production capabilities across its entire portfolio of products to meet heightened demand, but expects to continue experiencing capacity constraints on some Sealy bedding products in the U.S. through the third quarter of 2020.

https://seekingalpha.com/pr/17951765-tempur-sealy-reports-second-quarter-2020-results

July 30, 2020

Tempur Sealy Results

-Net Sales Decreased 8%, U.S. Sales Increased 2%

-Targeting 25% Net Sales Increase in Third Quarter 2020

-Leverage Ratio Lowest in Tempur Sealy History

PR Newswire

LEXINGTON, Ky., July 30, 2020 /PRNewswire/ — Tempur Sealy International, Inc. (TPX) announced financial results for the second quarter ended June 30, 2020.

SECOND QUARTER 2020 FINANCIAL SUMMARY

• Total net sales decreased 8.0% to $665.2 million as compared to $722.8 million in the second quarter of 2019. On a constant currency basis⁽¹⁾, total net sales decreased 7.3%, with a decrease of 2.9% in the North America business segment and a decrease of 26.9% in the International business segment.
• Gross margin was 40.0% as compared to 43.4% in the second quarter of 2019. Adjusted gross margin⁽¹⁾ was 40.6% in the second quarter of 2020. There were no adjustments to gross margin in the second quarter of 2019.
• Operating income decreased 34.1% to $53.4 million as compared to $81.0 million in the second quarter of 2019. Adjusted operating income⁽¹⁾ decreased 16.5% to $70.0 million as compared to $83.8 million in the second quarter of 2019. Operating income and adjusted operating income⁽¹⁾ in the second quarter of 2020 included $7.9 million of costs associated with temporarily closed company-owned retail stores and sales force retention costs as a result of the novel coronavirus (“COVID-19 charges”).
• Net income decreased 44.7% to $23.0 million as compared to $41.6 million in the second quarter of 2019. Adjusted net income⁽¹⁾ decreased 20.8% to $35.1 million as compared to $44.3 million in the second quarter of 2019.
• Earnings before interest, tax, depreciation and amortization (“EBITDA”)⁽¹⁾ decreased 21.8% to $85.2 million as compared to $109.0 million in the second quarter of 2019. Adjusted EBITDA (including COVID-19 charges)⁽¹⁾ decreased 10.0% to $101.7 million and adjusted EBITDA per credit facility⁽¹⁾ decreased 3.0% to $109.6 million as compared to $113.0 million in the second quarter of 2019.
• Adjusted EBITDA per credit facility⁽¹⁾ excluded $24.5 million of asset impairments, incremental operating costs due to the global pandemic, COVID-19 charges and other items in the second quarter of 2020.
• Earnings per diluted share (“EPS”) decreased 40.5% to $0.44 as compared to $0.74 in the second quarter of 2019. Adjusted EPS⁽¹⁾ decreased 13.9% to $0.68 as compared to $0.79 in the second quarter of 2019. Adjusted EPS⁽¹⁾ included $0.11 of COVID-19 charges in the second quarter of 2020.
• For the trailing twelve months ended June 30, 2020, leverage based on the ratio of consolidated indebtedness less netted cash⁽¹⁾ to Adjusted EBITDA per credit facility⁽¹⁾ was 2.83 times as compared to 3.65 times in the corresponding prior year period.
• Net cash provided by operating activities increased to a record $155.4 million as compared to $41.3 million in the second quarter of 2019.

Company Chairman and CEO Scott Thompson commented, “It was definitely a quarter of lows and highs, ending clearly on a high note for the industry and our business. Sales trends through the quarter accelerated each month and have continued to accelerate into July unabated. We believe the category is benefiting from a shift in consumer spend of discretionary dollars into the home category in which our products and brands are well-aligned to meet those consumer needs. We are currently experiencing tremendous order volume in the U.S. that is broad-based with growth across both Tempur and Sealy brands. In fact, our sales have been constrained by our Sealy manufacturing capacity and our suppliers’ capacity to meet this increased demand. Over the past five years, we have worked diligently to strengthen the foundation of our company, and we are now benefiting from our powerful omni-channel presence and strong competitive position in the industry. While a level of uncertainty remains, we expect the industry tailwinds and our sales momentum to continue.”

Business Segment Highlights

The Company’s business segments include North America and International. Corporate operating expenses are not included in either of the business segments and are presented separately as a reconciling item to consolidated results.

North America net sales decreased 3.0% to $570.5 million as compared to $588.1 million in the second quarter of 2019. On a constant currency basis⁽¹⁾, North America net sales decreased 2.9% as compared to the second quarter of 2019. Gross margin was 37.9% as compared to 40.8% in the second quarter of 2019. Adjusted gross margin⁽¹⁾ was 38.6% as compared to 40.8% in the second quarter of 2019. Operating margin was 12.2% as compared to 13.6% in the second quarter of 2019. Adjusted operating margin⁽¹⁾ was 14.3% as compared to 13.9% in the second quarter of 2019. Operating income and adjusted operating income⁽¹⁾ included $6.0 million of COVID-19 charges in the second quarter of 2020.

North America net sales through the wholesale channel decreased $33.9 million, or 6.4%, to $494.6 million as compared to the second quarter of 2019. North America net sales through the direct channel increased $16.3 million, or 27.3%, to $75.9 million, primarily driven by an increase of more than 140% in web sales as compared to the second quarter of 2019.

North America adjusted gross margin⁽¹⁾ declined 220 basis points as compared to the second quarter of 2019. The decline was primarily driven by product and brand mix, partially offset by decreased floor model expenses and lower commodity costs. North America adjusted operating margin⁽¹⁾ improved 40 basis points as compared to the second quarter of 2019. The improvement was primarily driven by the lower operating expenses as a result of cost actions in the quarter, partially offset by the decline in gross margin and COVID-19 charges.

International net sales decreased 29.7% to $94.7 million as compared to $134.7 million in the second quarter of 2019. On a constant currency basis⁽¹⁾, International net sales decreased 26.9% as compared to the second quarter of 2019. Gross margin was 52.5% as compared to 54.5% in the second quarter of 2019. Adjusted gross margin⁽¹⁾ was 53.0% as compared to 54.5% in the second quarter of 2019. Operating margin was 10.1% as compared to 20.3% in the second quarter of 2019. Adjusted operating margin⁽¹⁾ was 14.6% in the second quarter of 2020. There were no adjustments to operating margin in the second quarter of 2019.  Operating income and adjusted operating income⁽¹⁾ included $1.9 million of COVID-19 charges in the second quarter of 2020.

International net sales through the wholesale channel decreased $34.6 million, or 33.4%, to $69.1 million as compared to the second quarter of 2019. International net sales through the direct channel decreased $5.4 million, or 17.4%, to $25.6 million as compared to the second quarter of 2019.

International adjusted gross margin⁽¹⁾ declined 150 basis points as compared to the second quarter of 2019. The decline was primarily driven by fixed cost deleverage on lower unit volumes and decreased royalties, partially offset by favorable country mix. International adjusted operating margin⁽¹⁾ declined 570 basis points as compared to the second quarter of 2019. The decline was primarily driven by fixed cost deleverage on operating expenses, increased bad debt expense, COVID-19 charges and the decline in gross margin. These declines were partially offset by the performance of the Asia joint venture.

Corporate operating expense decreased to $25.6 million as compared to $26.5 million in the second quarter of 2019. Corporate adjusted operating expense⁽¹⁾ was $25.4 million in the second quarter of 2019. There were no adjustments to operating expense in the second quarter of 2020.

The Company ended the second quarter of 2020 with total debt of $1.8 billion and consolidated indebtedness less netted cash⁽¹⁾ of $1.6 billion. Leverage based on the ratio of consolidated indebtedness less netted cash⁽¹⁾ to adjusted EBITDA per credit facility⁽¹⁾ was 2.83 times for the trailing twelve months ended June 30, 2020, the lowest in Tempur Sealy history.

Company Chairman and CEO Scott Thompson commented, “We are lowering our target leverage ratio for the second time in the last 12 months. Our new revised target range is 2.0 to 3.0 times. The reduction in our leverage target is not due to any market concerns; it is a strategic move to provide optionality and lower market volatility. We have always seen our financial strength as a competitive advantage and part of our long-term strategy for the Company.”

Consolidated net income decreased 44.7% to $23.0 million as compared to $41.6 million in the second quarter of 2019. Adjusted net income⁽¹⁾ decreased 20.8% to $35.1 million as compared to $44.3 million in the second quarter of 2019. EPS decreased 40.5% to $0.44 as compared to $0.74 in the second quarter of 2019. Adjusted EPS⁽¹⁾, which included $0.11 of COVID-19 charges, decreased 13.9% to $0.68 as compared to $0.79 in the second quarter of 2019.

(1) This is a non-GAAP financial measure. Please refer to “Non-GAAP Financial Measures and Constant Currency Information” below.

Business Update

The Company continues to study, respond and optimize its operations related to the challenges from the COVID-19 crisis. The Company has taken, and continues to take precautionary measures to mitigate health risks during the evolving situation resulting from COVID-19.

The Company experienced a major reduction in total net sales when COVID-19 began materially impacting our North American business in mid-March. Order trends reached their lowest point in the second quarter when they were down 80% for a few days in early April and began to improve thereafter, with orders down approximately 55% for the full month of April as compared to the same month in 2019. The Company experienced significant and accelerating improvement in order trends throughout the remainder of the quarter, and the Company provided market updates in May and June as orders improved from previous expectations. This improvement was primarily due to the reopening of brick-and-mortar stores, the acceleration of e-commerce business trends, and a shift in consumer spending habits towards in-home purchases, including bedding products.

This unexpected and rapid increase in demand for bedding products has challenged the entire bedding industry and supply chain including the Company. The broad-based increase in demand coupled with supply chain constraints has resulted in longer order to delivery times for Sealy products in the second quarter and continue July to-date. The Tempur-Pedic manufacturing process is not as impacted by the current supply chain constraints as it is less labor-dependent and has fewer components than the Sealy process. The Company is in the process of ramping global production capabilities across its entire portfolio of products to meet heightened demand, but expects to continue experiencing capacity constraints on some Sealy bedding products in the U.S. through the third quarter of 2020.

https://seekingalpha.com/pr/17951765-tempur-sealy-reports-second-quarter-2020-results

July 30, 2020

Epoxy Comments from Huntsman Investors’ Call

Peter Huntsman

Our power business, largely going into power grid infrastructure was least impacted with volumes down approximately 2%. We did see modestly improving trends in most other markets in June. Despite the significantly lower sales, the business was able to generate an adjusted EBITDA margin of 16%, owing to stable pricing and the business’ ability to quickly adjust certain fixed costs. On May 18, we closed on our CVC Thermoset Specialties acquisition, which contributed slightly to the segment EBITDA. CVC is approximately 30% weighted to auto and approximately 15% weighted to aerospace.

The business had built inventory prior to our close. And as a result, we estimate a related incremental cost of nearly $5 million during the second half of 2020 as we approximate right size the inventory. Excluding this adjustment, CVC is performing roughly in line with our Advanced Materials business. On day one of ownership, we immediately began integrating the business, and we are confident that we will be able that we will be at synergy run rate of approximately $15 million when we exit 2021. We would expect to exceed our $15 million target as we move through 2022 and beyond. We’ve identified additional cost savings within the segment and are very focused on identifying additional organic and inorganic growth opportunities. As we look at quarter 3, improving trends quarter-over-quarter, most of our industrial markets will be more than offset by the continued challenges in our aerospace market. As a result, we estimate that our third quarter results in Advanced Materials are likely to be slightly lower than the second prior quarter.

Sean Douglas

Now, turning to Slide 10. During the quarter, we spent from available cash approximately $300 million to acquire the CVC Thermoset Specialties business and ended the second quarter with $2.6 billion of liquidity including approximately $1.2 billion of cash. Despite having a modest positive EBITDA for the quarter, we still managed to generate a positive free cash flow. In line with our expectation for the quarter, we benefited from favorable networking capital change of about $125 million. Our business divisions continue to place a high priority on efficiently managing all components of working capital. We paid $55 million in capital expenditures during the second quarter and still estimate a spend between $225 million and $235 million for the year.

Prashant Juvekar

Yes, Peter, I mean, I think you bought CVC Thermoset in second quarter. And I think you guys paid roughly 2.6x sales. So what are the normalized EBITDA margins at CVC? And how did EBITDA hold up in 2Q?

Peter Huntsman

Well, as we look at the overall margins, it’s around 30% and that’s where we would expect the business to continue to operate if not better once we’re done with synergies. I would remind you, as we said in our comments, that CVC is largely tracking the rest of our Advanced Materials business, and they’re down on their sales approximately 25% to 30%. And yes, so as we look at the overall business, we kind of would be taking that sort of a macro view on the business as we proceed throughout the 2021.

Prashant Juvekar

And then you compared recoveries between U.S. and Europe. But if you were to compare recoveries between like construction, automotive and aerospace, can you just talk about that? It seems like aerospace is clearly lagging. Do you think it’s possible to have a recovery in aerospace in 2021? Or is that more like 2022?

Peter Huntsman

No. I think that I don’t think you’ll see recovery in 2021. Again, that’s just my opinion. On the slide that we gave you on, there’s I think it’s Slide 6, there’s a bottom left-hand graph there that kind of shows the total planes that are in service, the total planes that are in storage and then the total that are on order. And one of the things with the aerospace business is you see in 9/11 and you see during the economic recession. So one was obviously in economy driven by terror and war. The other one was in economy driven by, well, bad economics. And this one is an economy driven by a health crisis. You see that there’s a three- to four year recovery. And I would certainly hope that there would be a sooner recovery than three to four years here.

But as I look in the past to try to figure out the future, I’m not terribly optimistic. When I especially when you look at the amount of planes that are in storage and the amount of number of planes in total service, what we’ve seen in the aerospace market is just it’s unprecedented, what we’re seeing right now. You cannot go back in time in the last 50, 60, 70 years and say, well, this is what happened then. My biggest concern as of just yesterday with Boeing building at an even reduced rate of output that the airlines aren’t even taking the planes once the planes are ready to be taken. They talked in a front page story yesterday of planes being stored off in Victorville and around the country, waiting for people to come pick up planes that were ordered and already built. So again, I don’t want to be overly pessimistic on aerospace. It makes up mid-teens of our entire business here. And there’s going to be a core, and this is going to be longer term, it’s going to recover, and it’s going to be a great business for us. But I think that of all of our areas of concern within the business, I think that that’s probably the one where I have the most pessimism.

And I think about footwear, I think about apparel, I think about even oilfield services. That are — I think are kind of some of those longer recovering sort of items. I think once retail sales start to recover, I think you’re going to see apparel and footwear not only come back, but it may actually come back with a vengeance sometime later this year, early next year. I don’t think it’s going to be next month. But I think you can start seeing as you start seeing retail stores and so forth reopen. So yes, my biggest concern would be around aerospace at this time. And I’m sorry, I forgot the other part of your question.

https://seekingalpha.com/article/4361597-huntsman-corporation-hun-ceo-peter-huntsman-on-q2-2020-results-earnings-call-transcript?part=single

July 30, 2020

Epoxy Comments from Huntsman Investors’ Call

Peter Huntsman

Our power business, largely going into power grid infrastructure was least impacted with volumes down approximately 2%. We did see modestly improving trends in most other markets in June. Despite the significantly lower sales, the business was able to generate an adjusted EBITDA margin of 16%, owing to stable pricing and the business’ ability to quickly adjust certain fixed costs. On May 18, we closed on our CVC Thermoset Specialties acquisition, which contributed slightly to the segment EBITDA. CVC is approximately 30% weighted to auto and approximately 15% weighted to aerospace.

The business had built inventory prior to our close. And as a result, we estimate a related incremental cost of nearly $5 million during the second half of 2020 as we approximate right size the inventory. Excluding this adjustment, CVC is performing roughly in line with our Advanced Materials business. On day one of ownership, we immediately began integrating the business, and we are confident that we will be able that we will be at synergy run rate of approximately $15 million when we exit 2021. We would expect to exceed our $15 million target as we move through 2022 and beyond. We’ve identified additional cost savings within the segment and are very focused on identifying additional organic and inorganic growth opportunities. As we look at quarter 3, improving trends quarter-over-quarter, most of our industrial markets will be more than offset by the continued challenges in our aerospace market. As a result, we estimate that our third quarter results in Advanced Materials are likely to be slightly lower than the second prior quarter.

Sean Douglas

Now, turning to Slide 10. During the quarter, we spent from available cash approximately $300 million to acquire the CVC Thermoset Specialties business and ended the second quarter with $2.6 billion of liquidity including approximately $1.2 billion of cash. Despite having a modest positive EBITDA for the quarter, we still managed to generate a positive free cash flow. In line with our expectation for the quarter, we benefited from favorable networking capital change of about $125 million. Our business divisions continue to place a high priority on efficiently managing all components of working capital. We paid $55 million in capital expenditures during the second quarter and still estimate a spend between $225 million and $235 million for the year.

Prashant Juvekar

Yes, Peter, I mean, I think you bought CVC Thermoset in second quarter. And I think you guys paid roughly 2.6x sales. So what are the normalized EBITDA margins at CVC? And how did EBITDA hold up in 2Q?

Peter Huntsman

Well, as we look at the overall margins, it’s around 30% and that’s where we would expect the business to continue to operate if not better once we’re done with synergies. I would remind you, as we said in our comments, that CVC is largely tracking the rest of our Advanced Materials business, and they’re down on their sales approximately 25% to 30%. And yes, so as we look at the overall business, we kind of would be taking that sort of a macro view on the business as we proceed throughout the 2021.

Prashant Juvekar

And then you compared recoveries between U.S. and Europe. But if you were to compare recoveries between like construction, automotive and aerospace, can you just talk about that? It seems like aerospace is clearly lagging. Do you think it’s possible to have a recovery in aerospace in 2021? Or is that more like 2022?

Peter Huntsman

No. I think that I don’t think you’ll see recovery in 2021. Again, that’s just my opinion. On the slide that we gave you on, there’s I think it’s Slide 6, there’s a bottom left-hand graph there that kind of shows the total planes that are in service, the total planes that are in storage and then the total that are on order. And one of the things with the aerospace business is you see in 9/11 and you see during the economic recession. So one was obviously in economy driven by terror and war. The other one was in economy driven by, well, bad economics. And this one is an economy driven by a health crisis. You see that there’s a three- to four year recovery. And I would certainly hope that there would be a sooner recovery than three to four years here.

But as I look in the past to try to figure out the future, I’m not terribly optimistic. When I especially when you look at the amount of planes that are in storage and the amount of number of planes in total service, what we’ve seen in the aerospace market is just it’s unprecedented, what we’re seeing right now. You cannot go back in time in the last 50, 60, 70 years and say, well, this is what happened then. My biggest concern as of just yesterday with Boeing building at an even reduced rate of output that the airlines aren’t even taking the planes once the planes are ready to be taken. They talked in a front page story yesterday of planes being stored off in Victorville and around the country, waiting for people to come pick up planes that were ordered and already built. So again, I don’t want to be overly pessimistic on aerospace. It makes up mid-teens of our entire business here. And there’s going to be a core, and this is going to be longer term, it’s going to recover, and it’s going to be a great business for us. But I think that of all of our areas of concern within the business, I think that that’s probably the one where I have the most pessimism.

And I think about footwear, I think about apparel, I think about even oilfield services. That are — I think are kind of some of those longer recovering sort of items. I think once retail sales start to recover, I think you’re going to see apparel and footwear not only come back, but it may actually come back with a vengeance sometime later this year, early next year. I don’t think it’s going to be next month. But I think you can start seeing as you start seeing retail stores and so forth reopen. So yes, my biggest concern would be around aerospace at this time. And I’m sorry, I forgot the other part of your question.

https://seekingalpha.com/article/4361597-huntsman-corporation-hun-ceo-peter-huntsman-on-q2-2020-results-earnings-call-transcript?part=single