May 11, 2020

Urethane and Epoxy Comments from Olin’s Investors Call

Olin Corporation (OLN) CEO John Fischer on Q1 2020 Results – Earnings Call Transcript

John Fischer

Thank you, Steve, and good morning, everyone. The response to the coronavirus did not have a significant impact on Olin’s results in the first quarter of 2020. Epoxy business did have mandatory manufacturing plant closures and operating reductions in Asia, which reduced first quarter 2020 Epoxy segment earnings by approximately $3 million. These epoxy resin manufacturing plants had resumed operations by the end of the first quarter of 2020.

All Olin manufacturing facilities worldwide are currently operating with the exception of those undergoing planned maintenance turnarounds. Our operations are among businesses that have been considered essential by government and public health authorities.

I will begin today’s presentation with Olin’s view on near-term market dynamics, followed by a discussion of the key highlights from Olin’s first quarter, then close with a detailed review of each business segment.

During the second half of March and into April Olin began to experience reduced demand across our chemical portfolio. Chlorine demand from urethane and isocyanates customers has declined. And there have been discussions of extended outages later in the year, especially in the isocyanates space. Hydrochloric acid has experienced a significant decline in demand tied to weakness in the oil and gas sector. Ethylene dichloride, which is an export product for Olin has also declined. And we expect epoxy resin demands to decline in May and June from first quarter levels.

The lower demand levels and major planned maintenance outages in the first and second quarters for chlorinated organics, vinyls and epichlorohydrin have caused chlor alkali operating rates in our system to decline from 2019 levels. While sales of bleach and chlorine into disinfectants have been strong and are expected to remain so, the near-term demand outlook for our chlorine portfolio is unclear.

We expect chlorine demand into vinyls, urethanes and isocyanates to decline significantly, reducing North American and global chlor alkali industry operating rates.

Now, let’s move to the performance of our Epoxy segment which is on Slide 7. During the first quarter of 2020, Olin’s Epoxy business generated adjusted EBITDA of $33.2 million. Our European Epoxy business experienced a force majeure declaration by a phenol supplier during the first quarter, which reduced epoxy resin and epoxy resin precursor production at our Stade, Germany facility.

The Epoxy business also faced the manufacturing plant closures and operating reductions in Asia due to the COVID-19 virus. These issues reduced our 2020 Epoxy segment earnings by approximately $10 million. The Epoxy business was able to partially offset these first quarter challenges through sequentially higher Epoxy volumes, higher product pricing and lower raw material and operating costs.

In the second quarter, the Epoxy business is expected to experience weakening demand from its automotive, industrial coatings, and oil and gas related customers in both Europe and North America. Lower raw material costs primarily benzene and propylene are expected to provide an offset to these anticipated lower resin volumes.

Finally, the second quarter 2020 Epoxy adjusted EBITDA will include approximately $15 million of costs associated with the planned maintenance turnaround at our Freeport, Texas, epichlorohydrin plant.

We will now look at liquid epoxy resin prices which are shown on Slide 8. During the first quarter European and North American liquid epoxy resin pricing improved sequentially from fourth quarter 2019 levels due to tight supply conditions.

The lower raw material costs primarily benzene and propylene together with an expected weaker resin demand environment in Europe and North America are expected to pressure epoxy resin pricing during the second quarter.

https://seekingalpha.com/article/4341694-olin-corporation-oln-ceo-john-fischer-on-q1-2020-results-earnings-call-transcript?part=single

May 11, 2020

Hanwha to Produce XDI

May 11, 2020

Hanwha to Produce XDI

May 8, 2020

Epoxy Related Comments from Huntsman’s Investors Call

Huntsman Corporation (HUN) CEO Peter Huntsman on Q1 2020 Results – Earnings Call Transcript

Peter Huntsman

Let’s turn to Slide number 5. Our Advanced Materials business reported adjusted EBITDA of $48 million down from $53 million in last year’s first quarter. The decline in adjusted EBITDA was driven by 11% lower volumes in the quarter due primarily to softer demand in our commodity, industrial and aerospace markets, partially offset by improved demand trends in markets such as electronics and power.

While China demand started off weak, we saw improved trends throughout the first quarter, which has continued into the second quarter. The specialty end of our portfolio did perform better than the overall segment average, but still declined 6%. As one would expect to see from a differentiated business with 85% of its sales revenue coming from a strong core of specialty products, our margins remain very resilient despite the volume headwinds we experienced.

We remain on track to close on the recently announced acquisition of CVC Thermoset Specialties over the coming months. We look forward to integrating this high margin specialty business into our Advanced Materials portfolio. This business augments our already attractive portfolio in areas such as structural adhesives, coatings, and composites. Furthermore, it will significantly strengthen our business in the Americas and provide us commercial opportunities to leverage our global platform by taking this product into our well-established Asian and European markets.

In the current environment, we’ll look to accelerate the integration of this business and to achieve a full run rate of expected synergies as quickly as possible. We expect to achieve a run rate of approximately $15 million synergies within the next two years.

COVID-19 will have a material impact on several of the core markets in our Advanced Materials business through the remainder of the year. However, it is worth highlighting several key differences between our Advanced Materials business today versus the 2009 recessionary environment when EBITDA fell by 50%. First, our exposure to commodity, basic epoxy resin and wind market is substantially lower today.

Our portfolio today significantly more diverse and differentiated versus prior years with around 85% of ourselves now going into specialty markets. Additionally, in contrast to our business in the past recessions, we’ve taken approximately $40 million of cost out of the business. Although today, we do experience significant headwinds in our aerospace business, which is now a bigger portion of our EBITDA today versus 2009.

I would like to point out that roughly 30% of our aerospace business today goes into other markets such as military applications and repair maintenance, which will be less impacted than new commercial aircraft built. Despite the likely volume challenges for the remainder of the year, the Advanced Materials business will remain focused on the integration of CVC, managing down costs, growth in certain markets to help offset weakness in others and in retaining the value of a specialty product in order to keep overall margin steady. Visibility remains low in segment EBITDA in the second quarter will be down more than 45% versus the prior year as volume weakness across most of its core markets will be partially offset by improving trends in Asia and the lower fixed cost.

Kevin McCarthy

Perfect. I appreciate the color. And then as a second question, can you remind us how much of Advanced Materials is exposed to aerospace, and I guess what the margin and volume outlook is for that market or maybe currently or rearview mirror, how the profitability there would compare to the non-aerospace piece of Advanced Materials?

Peter Huntsman

Yes. Well, as we look at the aerospace, it makes up about 35% to 40% of our EBITDA, it makes up about 15% to 20% of our overall volume. So on a pro rata basis, the profitability is proportionately higher on the aerospace segment. As I said in my comments, about 30% of that volume is made up of military, MRO business, other, so in about 70% of that, 35% to 40% of the EBITDA of Advanced Materials comes from the commercial OEMs of Boeing and Airbus and Embraer and other plane manufacturers around the world.

So as we look at that commercial OEM, it’s obviously has been devastated, but as we look out just in the last 48 hours in the revision of some of the building schedules coming back into line, personally, I don’t think it’s going to be quite as downward as the manufacturers say they’re going to be. But I based out more on just the sentiment what’s been said by Boeing and Airbus and so forth over the last 48 hours. But I think, again, we think that there’s little inventory in that supply chain.

And as you start seeing those aircraft lines coming back into manufacturing mode, I mean every aircraft manufacturing and assembly line has been down in the month of April. And then gradually we’ll be coming back up in May and June. Those OEMs will be starting to restock and pulling product through.

https://seekingalpha.com/article/4342221-huntsman-corporation-hun-ceo-peter-huntsman-on-q1-2020-results-earnings-call-transcript?part=single

May 8, 2020

Epoxy Related Comments from Huntsman’s Investors Call

Huntsman Corporation (HUN) CEO Peter Huntsman on Q1 2020 Results – Earnings Call Transcript

Peter Huntsman

Let’s turn to Slide number 5. Our Advanced Materials business reported adjusted EBITDA of $48 million down from $53 million in last year’s first quarter. The decline in adjusted EBITDA was driven by 11% lower volumes in the quarter due primarily to softer demand in our commodity, industrial and aerospace markets, partially offset by improved demand trends in markets such as electronics and power.

While China demand started off weak, we saw improved trends throughout the first quarter, which has continued into the second quarter. The specialty end of our portfolio did perform better than the overall segment average, but still declined 6%. As one would expect to see from a differentiated business with 85% of its sales revenue coming from a strong core of specialty products, our margins remain very resilient despite the volume headwinds we experienced.

We remain on track to close on the recently announced acquisition of CVC Thermoset Specialties over the coming months. We look forward to integrating this high margin specialty business into our Advanced Materials portfolio. This business augments our already attractive portfolio in areas such as structural adhesives, coatings, and composites. Furthermore, it will significantly strengthen our business in the Americas and provide us commercial opportunities to leverage our global platform by taking this product into our well-established Asian and European markets.

In the current environment, we’ll look to accelerate the integration of this business and to achieve a full run rate of expected synergies as quickly as possible. We expect to achieve a run rate of approximately $15 million synergies within the next two years.

COVID-19 will have a material impact on several of the core markets in our Advanced Materials business through the remainder of the year. However, it is worth highlighting several key differences between our Advanced Materials business today versus the 2009 recessionary environment when EBITDA fell by 50%. First, our exposure to commodity, basic epoxy resin and wind market is substantially lower today.

Our portfolio today significantly more diverse and differentiated versus prior years with around 85% of ourselves now going into specialty markets. Additionally, in contrast to our business in the past recessions, we’ve taken approximately $40 million of cost out of the business. Although today, we do experience significant headwinds in our aerospace business, which is now a bigger portion of our EBITDA today versus 2009.

I would like to point out that roughly 30% of our aerospace business today goes into other markets such as military applications and repair maintenance, which will be less impacted than new commercial aircraft built. Despite the likely volume challenges for the remainder of the year, the Advanced Materials business will remain focused on the integration of CVC, managing down costs, growth in certain markets to help offset weakness in others and in retaining the value of a specialty product in order to keep overall margin steady. Visibility remains low in segment EBITDA in the second quarter will be down more than 45% versus the prior year as volume weakness across most of its core markets will be partially offset by improving trends in Asia and the lower fixed cost.

Kevin McCarthy

Perfect. I appreciate the color. And then as a second question, can you remind us how much of Advanced Materials is exposed to aerospace, and I guess what the margin and volume outlook is for that market or maybe currently or rearview mirror, how the profitability there would compare to the non-aerospace piece of Advanced Materials?

Peter Huntsman

Yes. Well, as we look at the aerospace, it makes up about 35% to 40% of our EBITDA, it makes up about 15% to 20% of our overall volume. So on a pro rata basis, the profitability is proportionately higher on the aerospace segment. As I said in my comments, about 30% of that volume is made up of military, MRO business, other, so in about 70% of that, 35% to 40% of the EBITDA of Advanced Materials comes from the commercial OEMs of Boeing and Airbus and Embraer and other plane manufacturers around the world.

So as we look at that commercial OEM, it’s obviously has been devastated, but as we look out just in the last 48 hours in the revision of some of the building schedules coming back into line, personally, I don’t think it’s going to be quite as downward as the manufacturers say they’re going to be. But I based out more on just the sentiment what’s been said by Boeing and Airbus and so forth over the last 48 hours. But I think, again, we think that there’s little inventory in that supply chain.

And as you start seeing those aircraft lines coming back into manufacturing mode, I mean every aircraft manufacturing and assembly line has been down in the month of April. And then gradually we’ll be coming back up in May and June. Those OEMs will be starting to restock and pulling product through.

https://seekingalpha.com/article/4342221-huntsman-corporation-hun-ceo-peter-huntsman-on-q1-2020-results-earnings-call-transcript?part=single