The Urethane Blog
Everchem Updates
VOLUME XXI
September 14, 2023
Everchem’s exclusive Closers Only Club is reserved for only the highest caliber brass-baller salesmen in the chemical industry. Watch the hype video and be introduced to the top of the league: — read more
May 3, 2022
Covestro AG (CVVTF) CEO Markus Steilemann on Q1 2022 Results – Earnings Call Transcript
orporate Participants
Ronald Köhler – Head of Investor Relations
Markus Steilemann – Chief Executive Officer
Thomas Toepfer – Chief Financial Officer
Thomas Toepfer
Well, thank you very much, Markus, and also a very warm welcome from my side to everybody on the call. I’m on page four of the presentation. And as you can see and as Markus said in the beginning, our quarterly sales rose to 4.7 billion, which is actually the highest quarterly sales number in the Covestro history. That’s an uplift of 42%. And you see the biggest impact came from 23% higher prices that is the 757 million that you see in the bridge. And the increases actually came from both segments. And they were of course enabled by the continuously strong demand that we saw for our products.
With that, I would also say that we were technically sold out and the volume growth that we saw in Q1 was actually only limited by our product availability. The volume increase came particularly from our performance materials business but as Markus said, the business and the segment also benefited from a somewhat lower reference quarter, because in Q1 of last year, we had the winter storm, Uri that affected our sales at the time.
And you can also see in the bridge, the 314 million, which we labeled as portfolio effect this is obviously the effect from the acquisition and first-time consolidation of our RFM business. At this point, I just would like to mention and reiterate that the integration really runs very successfully. And we’re very pleased also with the progress that we’re making in terms of the synergies that we realize.
So with that, let’s turn to page five. The EBITDA bridge, as you can see, we achieved an EBITDA of 806 million this quarter coming from 743 a year ago. And you’ll see the big factor, of course, in the development is the pricing delta in the middle. As you can see, raw material prices increased by 820 million. And I would say it’s a very good achievement that we were able to pass on more than 90% of that to our customers, that is the 757 million so that we came out with an only slightly negative pricing delta of 63 million. So that means the volatile price increases were mostly and largely compensated by sales price increases.
You can see also the volume effect 39 million that is a volume leverage of 32%, relative to the 121 million additional sales that you saw on the previous page. So the 32% is slightly below the usual level of around 50%. And there’s some product mix effects behind that. FX is positive and in the other items of 36 million that includes a 38 million positive FX from lower provisions for variable compensation.
So with that, let’s go to the next page, Page six which shows you the sequential development of our sales and also EBITDA, first of all for the group. As you can see on the upper half of the page, there’s a continuous sales growth during the quarters. And the higher prices in Q1 2022 versus Q4 of last year, as I said led to the highest quarterly sales in the Covestro history. On the lower part of the page, you can see the quarterly EBITDA is on a relatively steady level as I said the pricing delta in Q1 this year versus Q4 is slightly negative. So sales prices almost but not fully could compensate, a big part of the strong raw material price increases, and we also benefited from a volume increase quarter-over-quarter. So sequentially, despite the unprecedented raw material price inflation, as you can see, we still managed to increase our EBITDA margin from 15.3% to 17.2%, than in Q1 of this year.
So let’s turn the page and look at our performance materials segment and look at the same set of numbers of the sequential development. As you can see, again, in the upper half of the page, there is a steady increase of quarterly sales. And the increase in Q1 ’22 versus Q4 stems particularly from the price increases quarter-over-quarter. The lower part of the page shows you also a relatively stable development of our quarterly EBITDA and Q1 EBITDA came in at 620 million. So that was 10 million below Q1 of 2021. And again, considering the strong raw material price increases, that shows you we were able to pass on the majority of that to our customers plus we had a positive x effect and higher volumes year-over-year.
The Q1 2022 EBITDA margin declined year-over-year, I would say that is a technical effect, again, driven by the higher raw material prices and then also higher sales numbers. I would say it’s more interesting to see that sequentially the EBITDA in Q1 of this year is 30 million above Q4 of last year, and slightly lower pricing delta from raw materials was more than compensated by the volume and the FX effect.
Let’s look at the solutions and specialty segment on page number eight. And again, you see sequential sales growth driven by a favorable pricing and volume development on the upper half of the page. Of course, the sales in Q1 of this year, if you compare them with Q1 of last year, contains the effects from the RFM portfolio contribution. If you look at EBITDA lower part of the page, the EBITDA in Q1 of this year, exceeds both the Q4 number and also the Q1 number of 2021. And the strong increase versus Q4 last year comes from higher volumes, positive pricing delta, and also lower provisions for variable compensation. And therefore with that our EBITDA margin increased q-over-q to 10% in Q1 of this year.
Markus Steilemann
Polyurethane based insulation is one of the best options to reach higher energy efficiency and between 30% to 40% more polyurethane is required to achieve these higher energy standards compared to the current standards. On a global scale with regard to climate protection, this should drive the growth rate of MDI by one additional percentage point per year. The reason energy price increases should then be an additional accelerator for implementing higher energy standards for buildings, opening more business opportunities for Covestro.
Wind energy last but not least, is one of the answers for our future supply with electricity and Covestro has already secured renewable power through the different PPAs we have signed. Beyond that we are considering wind energy is more than just a source of electricity, namely also as an attractive field of business. Our unique polyurethane resin for windmill blades, is planned to gain a 10% market share of the epoxy dominated market by 2032, offering an 8% reduction in manufacturing costs. In combination with other Covestro solutions, we can offer a 30% reduction in blade maintenance cost and a two-year extended lifetime.
Jaideep Pandya
Thank you. I have a few questions on raw materials really. Could you talk a little bit about availability on ammonia, on chlorine and then also, in light of what is happening in European refining? Are you concerned about benzene availability, if we have a sharp preference from a mid-distillates? That’s really my first question. And then the second question is, are you making when you look at your global landscape right now? Are you making very high profitability in North America compared to the rest of the world? And therefore, if North America market loosens because of demand, or because of more supply structurally into North America, then we will have some level of convergence? And then just final follow up is, could you just update on your MDI plans and progress in North America? Thanks a lot.
Markus Steilemann
So Jaideep, I take the first and maybe also third question and Thomas maybe the second one. So on the raw materials, ammonia as well as chlorine topic that you addressed and benzene availability, we currently do not foresee shortages of any of those materials. Part of the reason is that we are either, let’s say having long-term agreements with respect to suppliers where we have had no indications that that supply would actually be shortened. Secondly, at some sites, we are producing chlorine ourselves and/or ammonia, ourselves and or with partners. And also here, we have no indication that we would actually have a challenge to get access to ammonia. And from that perspective, switching now to benzene also here. Next to all you hear, we do not foresee any shortage particularly in benzene or even toluene, with regard to the output of the respective refineries. So from that perspective, for sure, it’s a complete containment, for example of Russian gas would come saw an embargo no matter from which side it will be induced, that will have significant impacts on the respective value chains.
May 3, 2022
Olin Corporation’s (OLN) CEO Scott Sutton on Q1 2022 Results – Earnings Call Transcript
Olin Corporation (NYSE:OLN) Q1 2022 Earnings Conference Call April 29, 2022 9:00 AM ET
Company Participants
Steve Keenan – Director-Investor Relations
Scott Sutton – Chief Executive Officer
Damian Gumpel – President, Epoxy and Corporate Strategy
Patrick Schumacher – President, Chlor-Alkali Products and Vinyls
Todd Slater – Chief Financial Officer
Scott Sutton
Yes. Thanks, Steve. Olin’s first quarter results met a number of expectations, but we can deliver more. That said the broad Olin global team delivered remarkable accomplishments and demonstrating that we have control over improving our value delivery in 2022 versus 2021, in the face of major CAPV power asset challenges and now including a multi-month complete Plaquemine site shutdown and an Epoxy market in which Olin absorbed and continues to absorb the demand shortfall. Both CAPV and Winchester delivered the highest quarterly EBITDA in our history. We were also pleased to announce our blue water joint venture with Mitsui & Company to substantially grow our participation in global liquidity and better service global demand. Complementing our leading position, Mitsui will bring to the joint venture both existing business and a tremendous global capability to drive long-term growth.
So beginning with Slide number 4. There are two main themes that I’ll review in these remarks. One thematic is our Olin winning model and the other is our Olin growth vectors. Here is the simple story of Olin. We’re the global leader in all of our businesses and seek to expand our leadership. Our annual levered free cash flow is $1.7 billion and it is very repeatable. We have a unique system value model that breaks the cycle phenomenon, in other words, the Olin winning model. And we have accretive initiatives in every business; we call them Olin growth vectors. So let’s start with the Olin winning model theme on Slide number 5 and really respond to a very popular question that we get all the time. The application of our new winning model prevents deeply cyclic results that Olin historically inflicted upon itself. Here’s the proposed proof. First on the left hand side from the top down, Olin could absorb demand shortfalls like we are doing today in epoxy, by the way, and run our entire global chemical assets portfolio at 50% utilization rates for a whole year and still deliver close to $2 billion of EBITDA in that same year.
So from the bottom up on the right hand side, so we are speaking of from the $636 million of EBITDA in 2020. We add back material changes that we don’t lose in the event of a recession and could still get to at least $1.5 billion of EBITDA. So with demand growth forecasted to be larger than supply growth across all of our businesses, we don’t see the recession scenario materializing but even if we did fall all the way down to $1.5 billion of EBITDA, we could still deliver more than $1 billion of levered free cash flow in that same year. So a recession year yield of 13% at today’s equity price.
Continuing the Olin winning model theme on Slide number 6, the optionality and the high level mechanics of our model are important to understand. So we have tried to summarize a day in the life of operating our model. First, we set our broad market participation to the forecasted weaker side of the ECU. In other words, we don’t chase the stronger side and we limit our participation on the weaker side.
Second, we determine which Olin chlorine derivative change to give preference based on their relative values. Third, we decide how far downstream in each derivative chain we will participate. And finally, as a fourth step, even for the products that we do participate in, it may make sense to purchase liquidity from the global market instead of producing the product.
The operation of the model is clearly more sophisticated than the simple summary. And as you might imagine, the operation is really executed across a deep and rational culture of value. Now let’s move to the Olin growth vectors thematic beginning on Slide number 7. Considering the backstop of our successful model, we can now cross an inflection point and run growth initiatives.
In epoxy, on Slide number 9, Olin is positioning its technology to take advantage of robust future demand driven by megatrends. There are clear and specific global growth factors that will pull on epoxy demand, namely giant wind turbines, lighter automobiles, electrified vehicles and more sustainable construction methods. For each of these vectors, Olin has developed a proprietary epoxy system to solve a technical and enabling feature needed in the end product.
Mike Sison
Hi, guys, a nice quarter and outlook. In terms of Epoxy, I was just curious – I think you’ve mentioned in the prepared remarks that demand is a little bit kind of soft. And just wanted to get a little bit of color on that and how you see sort of Epoxy performing over the next couple of quarters?
Scott Sutton
Yes. Hi, Mike, I mean, Damian, give us just a couple of comments on that. But just to make it even clearer, yes, demand has come down. We’ve absorbed that demand shortfall. And in fact, the first quarter was the lowest volume Epoxy quarter in the history of this business. And I think Damian can give you a view of where demand sort of sits right now.
Damian Gumpel
Sure. Mike, good morning. Yes, we look at three factors meeting demand right now. First is obviously the situation – the unfortunate situation going on in Europe. The second area is the ongoing supply chain issues that are making it difficult to get other materials in then combined with the epoxy to make a finished good. Automotive is a clear example there. And the third example, the third area we see is China with the ongoing deep lockdowns that are underway here in the first quarter. All those factors are meeting demand some. That said, we are seeing that second quarter demand is a little better than the first quarter. We would normally expect that with seasonality. So we are seeing that.
The U.S. continues to have a good, robust epoxy demand and we continue to – but all that said, we continue to set our value point for LER. We don’t come off of that value point. We moderate our production based on the demand that’s available to us from our customer base. And the last comment I’ll say is that even with all that, we’re not seeing – the world is able to make more LER and that kind of reinforces our point that right now, Olin is – we continue to absorb the demand shortfall out there.
Kevin McCarthy
Yes, good morning. Scott, I’d appreciate your updated view on pricing prospects in both chlorine and caustic. With the Plaquemine site down for a multi-month period, we’ve seen some of your competitors put forth very aggressive or at least high price increase proposals for the second quarter. Can you speak to supply-demand balances in the industry as they are and what that might mean for the price opportunity over the near term?
Scott Sutton
Well, Patrick will give us a little color on forward value plays by Olin. I would just tell you that it’s been quite tight and all of this makes it even tighter. And even on a long-term outlook, we tried to demonstrate in our last quarterly call that demand growth certainly outstrips supply growth. So that’s just setting it up. And Patrick, do you want to expand a little bit?
Patrick Schumacher
Yes. I would just say that prices in the quarter moved up meaningfully from the fourth quarter for all of our businesses. In the market, there was – as some of you noted in your notes, there is a bit of a lull in Asia in the middle of the first quarter in that caustic market, but those prices are moving again. You guys saw it would just settled in Europe for contract prices for the second quarter. That’s a reflection of tightness in that caustic market globally. So we see pricing momentum continuing really across the board.
Arun Viswanathan
Great. Thanks for taking my question. I guess I just wanted to – you noted some soft demand in Epoxy. So I guess, first, I just wanted to ask about if you can kind of go through your markets a little bit, let us know what you’re seeing? I know – also you said there is some weakness in Asian caustic in Q1. But structurally speaking, I guess, how do you see your different end markets? And maybe if we could just focus on chlorine, caustic and epoxy in Winchester, that would be great. Thanks.
Scott Sutton
Yes. I mean from a high level, I mean, end markets are generally fine, except where we pointed out that epoxy got a bit slow for reasons Damian went through, be it Asia, auto Europe and a little bit of a lull even in wind blade production that does come back. That has actually stabilized and that was the nature of Damian’s comment where he said that, look, second quarter looks just a bit better than first quarter in terms of demand. I mean, demand is fine everywhere else. Of course, supply is quite tight also. If you take it to our Winchester business, which we haven’t talked about yet on this call, demand looks long-term good. In fact, with all the events going on with Russia’s war effectively they were the largest importer of ammunition into the U.S., in fact, about 12% of the market. And I suspect the U.S. is at long for continuing to import that ammunition. So that’s just one more item that enhances the demand profile looking forward for Winchester.
Steve Byrne
Yes. So I was curious about your multiple pathways on Slide 6 and you’re clearly moving downstream into epoxy and vinyls. I was just curious if there might be some other pathways you could consider and one that seems possible would be the isocyanate into polyurethanes. Do you sell phosgene into the isocyanate industry and is that another potential path for you?
Scott Sutton
Yes, I mean, thanks for the question. Look, there’s lots of paths that are possible in the ECU world, right. And we’re already a supplier of either chlorine molecules or chlorine derivative intermediates into many different chains, right. The ones we put on that Slide 6 are the chains that we effectively operate today, right. We were always considering different acquisitions, mergers, whatever the case is. And there’s a number of derivative chains that could make a lot of sense, especially as Olin’s equity value gets lifted as well, it’s challenging to do a big move today considering where we trade at, not impossible, just challenging.
Jeff Zekauskas
Thanks very much. You said that you expected to earn more in your chlor-alkali business in the second quarter than in the first. Why is that given all of the difficulties that you’ve got, are the operational issues in the second quarter less than they were in the first and how big were the operational issues in the first quarter?
Scott Sutton
Hi Jeff. No, the operational issues in the second quarter are more significant than the first quarter. In fact, it’s when all of the negatives sort of merge together but the path that we’re on Jeff to continue enhancing the value of the ECU and derivatives from the ECU has a lot of continuing momentum. That continuing momentum overwhelms those negative issues. I think in the press release, we called out that just the plaque of event itself has a direct negative of $75 million to our earnings in our CAPV business. The other events have negatives as well, but we overcome all of those, based on the momentum that we have in the business to improve the value.
Josh Spector
Yes. Hi, thanks for taking my question. I just had a follow up on your recession scenario analysis. Just curious that, so it looks like you’re taking operating rates down but you’re assuming that you can maintain pricing at least on the chlorine side. I was wondering if you could comment on what your pricing assumption is there on the caustic side as well. And just going back to chlorine, what gives you confident on being able to maintain that pricing? Is there something contractually set that locks that in place for you guys? Or are you just assuming you could deselect where it weakens? Thanks.
Scott Sutton
Yeah. Thanks for the question. I mean, it’s really like a chicken or egg question, right. I mean, this is of course a hypothetical case, just trying to demonstrate the extent that we’re willing to go to preserve our product pricing. I mean, the reason you would take your complete global chemicals assets down to a 50% utilization rate for a whole year is to preserve product pricing, right. So we control our own destiny there and we’re positioned to do that even in the case of a global recession, particularly on – you brought up merchant chlorine, that for many years sort of priced in the low $100 a ton, and we’re directionally moving it toward $1,000 a ton on a pricing ratchet that we won’t have to move back from. Even in a recession when you think about the applications that are left with merchant chlorine, it’s things like water treatment and wastewater treatment and pharmaceuticals and agrichemicals those demands continue.
May 3, 2022
Olin Corporation’s (OLN) CEO Scott Sutton on Q1 2022 Results – Earnings Call Transcript
Olin Corporation (NYSE:OLN) Q1 2022 Earnings Conference Call April 29, 2022 9:00 AM ET
Company Participants
Steve Keenan – Director-Investor Relations
Scott Sutton – Chief Executive Officer
Damian Gumpel – President, Epoxy and Corporate Strategy
Patrick Schumacher – President, Chlor-Alkali Products and Vinyls
Todd Slater – Chief Financial Officer
Scott Sutton
Yes. Thanks, Steve. Olin’s first quarter results met a number of expectations, but we can deliver more. That said the broad Olin global team delivered remarkable accomplishments and demonstrating that we have control over improving our value delivery in 2022 versus 2021, in the face of major CAPV power asset challenges and now including a multi-month complete Plaquemine site shutdown and an Epoxy market in which Olin absorbed and continues to absorb the demand shortfall. Both CAPV and Winchester delivered the highest quarterly EBITDA in our history. We were also pleased to announce our blue water joint venture with Mitsui & Company to substantially grow our participation in global liquidity and better service global demand. Complementing our leading position, Mitsui will bring to the joint venture both existing business and a tremendous global capability to drive long-term growth.
So beginning with Slide number 4. There are two main themes that I’ll review in these remarks. One thematic is our Olin winning model and the other is our Olin growth vectors. Here is the simple story of Olin. We’re the global leader in all of our businesses and seek to expand our leadership. Our annual levered free cash flow is $1.7 billion and it is very repeatable. We have a unique system value model that breaks the cycle phenomenon, in other words, the Olin winning model. And we have accretive initiatives in every business; we call them Olin growth vectors. So let’s start with the Olin winning model theme on Slide number 5 and really respond to a very popular question that we get all the time. The application of our new winning model prevents deeply cyclic results that Olin historically inflicted upon itself. Here’s the proposed proof. First on the left hand side from the top down, Olin could absorb demand shortfalls like we are doing today in epoxy, by the way, and run our entire global chemical assets portfolio at 50% utilization rates for a whole year and still deliver close to $2 billion of EBITDA in that same year.
So from the bottom up on the right hand side, so we are speaking of from the $636 million of EBITDA in 2020. We add back material changes that we don’t lose in the event of a recession and could still get to at least $1.5 billion of EBITDA. So with demand growth forecasted to be larger than supply growth across all of our businesses, we don’t see the recession scenario materializing but even if we did fall all the way down to $1.5 billion of EBITDA, we could still deliver more than $1 billion of levered free cash flow in that same year. So a recession year yield of 13% at today’s equity price.
Continuing the Olin winning model theme on Slide number 6, the optionality and the high level mechanics of our model are important to understand. So we have tried to summarize a day in the life of operating our model. First, we set our broad market participation to the forecasted weaker side of the ECU. In other words, we don’t chase the stronger side and we limit our participation on the weaker side.
Second, we determine which Olin chlorine derivative change to give preference based on their relative values. Third, we decide how far downstream in each derivative chain we will participate. And finally, as a fourth step, even for the products that we do participate in, it may make sense to purchase liquidity from the global market instead of producing the product.
The operation of the model is clearly more sophisticated than the simple summary. And as you might imagine, the operation is really executed across a deep and rational culture of value. Now let’s move to the Olin growth vectors thematic beginning on Slide number 7. Considering the backstop of our successful model, we can now cross an inflection point and run growth initiatives.
In epoxy, on Slide number 9, Olin is positioning its technology to take advantage of robust future demand driven by megatrends. There are clear and specific global growth factors that will pull on epoxy demand, namely giant wind turbines, lighter automobiles, electrified vehicles and more sustainable construction methods. For each of these vectors, Olin has developed a proprietary epoxy system to solve a technical and enabling feature needed in the end product.
Mike Sison
Hi, guys, a nice quarter and outlook. In terms of Epoxy, I was just curious – I think you’ve mentioned in the prepared remarks that demand is a little bit kind of soft. And just wanted to get a little bit of color on that and how you see sort of Epoxy performing over the next couple of quarters?
Scott Sutton
Yes. Hi, Mike, I mean, Damian, give us just a couple of comments on that. But just to make it even clearer, yes, demand has come down. We’ve absorbed that demand shortfall. And in fact, the first quarter was the lowest volume Epoxy quarter in the history of this business. And I think Damian can give you a view of where demand sort of sits right now.
Damian Gumpel
Sure. Mike, good morning. Yes, we look at three factors meeting demand right now. First is obviously the situation – the unfortunate situation going on in Europe. The second area is the ongoing supply chain issues that are making it difficult to get other materials in then combined with the epoxy to make a finished good. Automotive is a clear example there. And the third example, the third area we see is China with the ongoing deep lockdowns that are underway here in the first quarter. All those factors are meeting demand some. That said, we are seeing that second quarter demand is a little better than the first quarter. We would normally expect that with seasonality. So we are seeing that.
The U.S. continues to have a good, robust epoxy demand and we continue to – but all that said, we continue to set our value point for LER. We don’t come off of that value point. We moderate our production based on the demand that’s available to us from our customer base. And the last comment I’ll say is that even with all that, we’re not seeing – the world is able to make more LER and that kind of reinforces our point that right now, Olin is – we continue to absorb the demand shortfall out there.
Kevin McCarthy
Yes, good morning. Scott, I’d appreciate your updated view on pricing prospects in both chlorine and caustic. With the Plaquemine site down for a multi-month period, we’ve seen some of your competitors put forth very aggressive or at least high price increase proposals for the second quarter. Can you speak to supply-demand balances in the industry as they are and what that might mean for the price opportunity over the near term?
Scott Sutton
Well, Patrick will give us a little color on forward value plays by Olin. I would just tell you that it’s been quite tight and all of this makes it even tighter. And even on a long-term outlook, we tried to demonstrate in our last quarterly call that demand growth certainly outstrips supply growth. So that’s just setting it up. And Patrick, do you want to expand a little bit?
Patrick Schumacher
Yes. I would just say that prices in the quarter moved up meaningfully from the fourth quarter for all of our businesses. In the market, there was – as some of you noted in your notes, there is a bit of a lull in Asia in the middle of the first quarter in that caustic market, but those prices are moving again. You guys saw it would just settled in Europe for contract prices for the second quarter. That’s a reflection of tightness in that caustic market globally. So we see pricing momentum continuing really across the board.
Arun Viswanathan
Great. Thanks for taking my question. I guess I just wanted to – you noted some soft demand in Epoxy. So I guess, first, I just wanted to ask about if you can kind of go through your markets a little bit, let us know what you’re seeing? I know – also you said there is some weakness in Asian caustic in Q1. But structurally speaking, I guess, how do you see your different end markets? And maybe if we could just focus on chlorine, caustic and epoxy in Winchester, that would be great. Thanks.
Scott Sutton
Yes. I mean from a high level, I mean, end markets are generally fine, except where we pointed out that epoxy got a bit slow for reasons Damian went through, be it Asia, auto Europe and a little bit of a lull even in wind blade production that does come back. That has actually stabilized and that was the nature of Damian’s comment where he said that, look, second quarter looks just a bit better than first quarter in terms of demand. I mean, demand is fine everywhere else. Of course, supply is quite tight also. If you take it to our Winchester business, which we haven’t talked about yet on this call, demand looks long-term good. In fact, with all the events going on with Russia’s war effectively they were the largest importer of ammunition into the U.S., in fact, about 12% of the market. And I suspect the U.S. is at long for continuing to import that ammunition. So that’s just one more item that enhances the demand profile looking forward for Winchester.
Steve Byrne
Yes. So I was curious about your multiple pathways on Slide 6 and you’re clearly moving downstream into epoxy and vinyls. I was just curious if there might be some other pathways you could consider and one that seems possible would be the isocyanate into polyurethanes. Do you sell phosgene into the isocyanate industry and is that another potential path for you?
Scott Sutton
Yes, I mean, thanks for the question. Look, there’s lots of paths that are possible in the ECU world, right. And we’re already a supplier of either chlorine molecules or chlorine derivative intermediates into many different chains, right. The ones we put on that Slide 6 are the chains that we effectively operate today, right. We were always considering different acquisitions, mergers, whatever the case is. And there’s a number of derivative chains that could make a lot of sense, especially as Olin’s equity value gets lifted as well, it’s challenging to do a big move today considering where we trade at, not impossible, just challenging.
Jeff Zekauskas
Thanks very much. You said that you expected to earn more in your chlor-alkali business in the second quarter than in the first. Why is that given all of the difficulties that you’ve got, are the operational issues in the second quarter less than they were in the first and how big were the operational issues in the first quarter?
Scott Sutton
Hi Jeff. No, the operational issues in the second quarter are more significant than the first quarter. In fact, it’s when all of the negatives sort of merge together but the path that we’re on Jeff to continue enhancing the value of the ECU and derivatives from the ECU has a lot of continuing momentum. That continuing momentum overwhelms those negative issues. I think in the press release, we called out that just the plaque of event itself has a direct negative of $75 million to our earnings in our CAPV business. The other events have negatives as well, but we overcome all of those, based on the momentum that we have in the business to improve the value.
Josh Spector
Yes. Hi, thanks for taking my question. I just had a follow up on your recession scenario analysis. Just curious that, so it looks like you’re taking operating rates down but you’re assuming that you can maintain pricing at least on the chlorine side. I was wondering if you could comment on what your pricing assumption is there on the caustic side as well. And just going back to chlorine, what gives you confident on being able to maintain that pricing? Is there something contractually set that locks that in place for you guys? Or are you just assuming you could deselect where it weakens? Thanks.
Scott Sutton
Yeah. Thanks for the question. I mean, it’s really like a chicken or egg question, right. I mean, this is of course a hypothetical case, just trying to demonstrate the extent that we’re willing to go to preserve our product pricing. I mean, the reason you would take your complete global chemicals assets down to a 50% utilization rate for a whole year is to preserve product pricing, right. So we control our own destiny there and we’re positioned to do that even in the case of a global recession, particularly on – you brought up merchant chlorine, that for many years sort of priced in the low $100 a ton, and we’re directionally moving it toward $1,000 a ton on a pricing ratchet that we won’t have to move back from. Even in a recession when you think about the applications that are left with merchant chlorine, it’s things like water treatment and wastewater treatment and pharmaceuticals and agrichemicals those demands continue.
May 2, 2022
Jury Awards Huntsman $94 Million in Case Against Praxair/Linde
Download as PDF May 02, 2022 7:21am EDT
Total Damages to Exceed $125 Million After Court Applies Interest
THE WOODLANDS, Texas, May 2, 2022 /PRNewswire/ — Huntsman Corporation (NYSE: HUN) today announced that a New Orleans jury awarded it $93,878,108 in the Company’s long-running court battle against Praxair/Linde, one of the industrial gas suppliers to Huntsman’s Geismar, Louisiana MDI manufacturing site. The case was filed after Praxair refused to properly maintain its own Geismar facility and then repeatedly failed to supply Huntsman’s requirements for industrial gas needed to manufacture MDI under long-term supply contracts that expired in 2013. The 12-person jury returned their verdict this past Friday, April 29, and, after the Court applies the appropriate amount of interest, total damages awarded Huntsman will exceed $125 million.
Peter R. Huntsman, Chairman, President and Chief Executive Officer, commented on the case after the jury verdict was returned: “This lawsuit was filed in 2014 and justice was a very long time coming. I could not be prouder of the entire Huntsman team – from our PU division and purchasing personnel who managed the constant operational and commercial upsets occurring when Praxair’s poorly-maintained facilities went down from 2004 through 2013, to our corporate legal and finance teams that pursued the litigation through trial after we filed suit. They displayed the integrity, professionalism, perseverance, and ingenuity – hallmarks of Huntsman associates around the world – needed to take on and defeat an irresponsible and better-funded adversary on the ground at Geismar and in the courts in New Orleans. I’d like to recognize all of them and thank the 12 members of the jury and the trial judge for their time and commitment to fairness in the courtroom.
Mr. Huntsman continued: “After winning more than $600 million against Albemarle this past October, this jury verdict, which we are confident will be affirmed on appeal, makes the second substantial damages award Huntsman has secured in the past seven months. David Stryker, our General Counsel, led both these efforts and has put together an incredibly talented internal and external team of lawyers to ensure no legal wrong against the Company goes unredressed. My management team and I were more than happy to testify in each of these cases and I will be happy to testify whenever necessary in the future to make sure our shareholders get the full value of their stock ownership.”
The case against Praxair was first filed in 2014 but owing to Covid-19 among other matters, did not go to trial until this April. After a three-week trial, the 12-person jury took less than three hours to render its verdict, unanimously finding that Praxair repeatedly breached its promises to Huntsman and that those breaches directly caused Huntsman substantial financial damages. Huntsman was represented in the case by Vinson & Elkins and the New Orleans-based trial firm of Chehardy, Sherman & Williams. James M. Williams of Chehardy and Jim Thompson of V&E were co-lead counsel during the trial.
May 2, 2022
Jury Awards Huntsman $94 Million in Case Against Praxair/Linde
Download as PDF May 02, 2022 7:21am EDT
Total Damages to Exceed $125 Million After Court Applies Interest
THE WOODLANDS, Texas, May 2, 2022 /PRNewswire/ — Huntsman Corporation (NYSE: HUN) today announced that a New Orleans jury awarded it $93,878,108 in the Company’s long-running court battle against Praxair/Linde, one of the industrial gas suppliers to Huntsman’s Geismar, Louisiana MDI manufacturing site. The case was filed after Praxair refused to properly maintain its own Geismar facility and then repeatedly failed to supply Huntsman’s requirements for industrial gas needed to manufacture MDI under long-term supply contracts that expired in 2013. The 12-person jury returned their verdict this past Friday, April 29, and, after the Court applies the appropriate amount of interest, total damages awarded Huntsman will exceed $125 million.
Peter R. Huntsman, Chairman, President and Chief Executive Officer, commented on the case after the jury verdict was returned: “This lawsuit was filed in 2014 and justice was a very long time coming. I could not be prouder of the entire Huntsman team – from our PU division and purchasing personnel who managed the constant operational and commercial upsets occurring when Praxair’s poorly-maintained facilities went down from 2004 through 2013, to our corporate legal and finance teams that pursued the litigation through trial after we filed suit. They displayed the integrity, professionalism, perseverance, and ingenuity – hallmarks of Huntsman associates around the world – needed to take on and defeat an irresponsible and better-funded adversary on the ground at Geismar and in the courts in New Orleans. I’d like to recognize all of them and thank the 12 members of the jury and the trial judge for their time and commitment to fairness in the courtroom.
Mr. Huntsman continued: “After winning more than $600 million against Albemarle this past October, this jury verdict, which we are confident will be affirmed on appeal, makes the second substantial damages award Huntsman has secured in the past seven months. David Stryker, our General Counsel, led both these efforts and has put together an incredibly talented internal and external team of lawyers to ensure no legal wrong against the Company goes unredressed. My management team and I were more than happy to testify in each of these cases and I will be happy to testify whenever necessary in the future to make sure our shareholders get the full value of their stock ownership.”
The case against Praxair was first filed in 2014 but owing to Covid-19 among other matters, did not go to trial until this April. After a three-week trial, the 12-person jury took less than three hours to render its verdict, unanimously finding that Praxair repeatedly breached its promises to Huntsman and that those breaches directly caused Huntsman substantial financial damages. Huntsman was represented in the case by Vinson & Elkins and the New Orleans-based trial firm of Chehardy, Sherman & Williams. James M. Williams of Chehardy and Jim Thompson of V&E were co-lead counsel during the trial.
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