The Urethane Blog
February 21, 2023
Q4 2022 Stepan Co Earnings Call
Fri, February 17, 2023 at 5:02 a.m. EST·19 min read
Participants
Luis E. Rojo; VP & CFO; Stepan Company
Scott R. Behrens; CEO, COO, President & Director; Stepan Company
David Cyrus Silver; Senior MD & Director of Equity Research; CL King & Associates, Inc., Research Division
David Joseph Storms; Research Analyst; Stonegate Capital Markets, Inc., Research Division
Michael Joseph Harrison; MD & Senior Chemicals Analyst; Seaport Research Partners
Vincent Alwardt Anderson; Associate; Stifel, Nicolaus & Company, Incorporated, Research Division
Scott R. Behrens
Good morning and thank you all for joining us today to discuss our fourth quarter and full year results. To begin, I will share our fourth quarter and full year highlights and strategy outlook, while Luis will provide additional details on our financial results. Despite significant external supply chain challenges in a difficult macro environment, the business was able to deliver another record year. Significant inflation in raw materials, logistics and other expenses were fully offset with pricing actions, mix improvements and productivity efforts.
Michael Joseph Harrison
I was hoping that you could discuss some of the factors that drove the 17% volume decline that you saw in Q4? Maybe help us understand how those split out between destocking, underlying market weakness and other factors? And were there any key differences in the volume impacts, particularly from destocking as you look between the Surfactants business and the Polymers business.
Luis E. Rojo
Thank you, Mike. Look, as you rightly said, so when you think about the minus 17%, you need to think about those three buckets, right? One is demand, one is destocking and the other is the transition to low 1,4 dioxane product, which we clearly communicated in October that we lost a Tier 1 customer, and there are other impacts on the volume side related to the transition. So if you think about those three big buckets and you think about the minus 17%, roughly, each bucket is one-third. So think about 5%, 6% is the impact of each of them. And of course, when you think about polymers, you don’t have the low 1,4 dioxane transition, so you can see more than a half and half situation between the other two buckets. But that’s how we’ll summarize the three big buckets that we saw in the minus 17% in Q4.
Michael Joseph Harrison
All right. And I guess in terms of destocking, that can’t go on forever from your customers. Are you starting to see signs that order patterns are normalizing at some point here in Q1? Maybe talk about what you’re hearing from your customers in surfactants as well as in polymers.
Scott R. Behrens
Yes, Mike, I would say that it can’t go on forever as well. But I would say, incrementally, we may be seeing a little uptick versus what the pattern we saw in Q4, but I don’t think we’re done with destocking activities at this point. As you compare surfactants versus polymers, obviously, two different channels to the retail end use. I would say on the polymer side, it’s — once you get past the manufacture of the rigid insulation panels that our Polyols goes into, it’s a highly fragmented market of distributors and contractors across the country.
Vincent Alwardt Anderson
I just wanted to ask, given your existing alkoxylate portfolio and the PerformanX acquisition last quarter, how quickly do you think you can ramp and then fill the order book for the Pasadena facility once it’s up and running?
Scott R. Behrens
Yes. Good morning Vincent, from an alkoxylation perspective, we have two existing alkoxylation facilities here in the U.S. today. Pasadena will be our third. We also utilize a broad network of third-party toll manufacturers today that we have been using as capacity to continue to grow the product line, which has been doing very well, exceeding our expectations. So upon startup at Pasadena, we will have a very good opportunity to get that utilization up in balance with how we want to manage our external tolling network. So we have, I think, the ultimate flexibility to ensure the proper utilization of our internal assets and allow us to continue to grow using tollers as needed.
Vincent Alwardt Anderson
Perfect. And I’m not going to ask you to predict the future on raw materials and all of that. But if we continue along this slow demand environment through at least the first half of the year, is there any reason that we wouldn’t see a little bit of positive timing impact between price and raws like we’ve seen in past down cycles.
Scott R. Behrens
It’s hard to say, Vince. I would say that raw materials kind of plateaued in Q4. So it’s pretty stable right now. And whether it’s going up or down from here, it’s hard to predict. There’s too many factors that play into that. Our focus is really we will continue our pricing actions to cover our continuing any cost inflation that we have within the business and operations. So I think it’s wait and see, but we expect that we’ll continue with our pricing strategy as needed.
David Cyrus Silver
That’s great color, I appreciate it. My next question would be kind of about new products. And in particular, I think I’ve asked this question some time ago, but does Stepan track, I guess, or calculate internally a vitality index? In other words, percentage of revenues from products that have been developed in the last three years, the last five years, something like that. And if not, I was just wondering if you could call out from a revenue or from a margin impact, however you look at it internally.
Scott R. Behrens
Yes. So I’d first start with where we are focused on strategic end market growth. And that’s within the agricultural chemicals space as well as specialty alkoxylates. So in agricultural chemicals, we’re part of that development pipeline for new active pesticides. And that pipeline is anywhere from 5 to 10 years long for new products to come to market. So we’re deeply embedded in those development pipelines with the large pesticide producers out there, which is a really great place to be, and we have new products being launched in multiple regions (inaudible). The other big focus for us is in specialty alkoxylates.
Luis E. Rojo
What I would add, David, is we are investing and we are making good progress as Scott mentioned in the remark spray foam also. So we are working with new products there. If you think — we also talk about [Chemco] we are relaunching that product line. And actually, when you think about low 1,4 dioxane, right, that’s kind of at the end, a significant investment that we’re making to have a totally new ether sulfate portfolio that meets the new regulation, but that’s at the end, there’s a lot of new volume that is going to be in a new product versus the past.
David Cyrus Silver
Okay. Great. And I should have mentioned 1,4 dioxane, of course. Last question, and this would be on your marketing, and it has to do with your strategy for Tier 2, Tier 3 customer development. But you did mention, I think, a net addition customer base of about 550 for 2022. And I’m just wondering if we should think about a particular target for next year? And more to the point, do you think you’ve kind of, I don’t know, cherry-picked or high-graded the opportunities out there on the Tier 2, Tier 3 base of customers?
Scott R. Behrens
Yeah. No, David, great question. We’ve been, I think, pretty clear that growing this Tier 2, Tier 3 segment is a major portion of our company’s growth strategy. And we continue to invest in sales, marketing and R&D to support our continued growth with this segment on a global basis. We’ve identified that target for a prospective customer list in Tier 2, Tier 3 around the world in the tens of thousands. And becoming more efficient in reaching and securing orders from these customers around the world is our focus. And the $550 million is a good number. We’re proud of that, and that leads to improved profitability for our company. And that’s kind of our expectation going forward is our teams are going to continue to execute and deliver those new customers on a net basis in that hundreds per year.
https://ca.movies.yahoo.com/q4-2022-stepan-co-earnings-100228864.html
February 21, 2023
Increased global supply of PU-based adhesive
improves choice and supply chain resilience
Manufacturers and end users around the world are benefiting from increased availability of PU-
based adhesives following the introduction of the new PearlBond adhesive range produced by
leading Dubai-based system house, Pearl Polyurethane Systems. Previously, manufacturers in many
parts of the world had access to a limited choice of suppliers, constraining production levels and
restricting R&D opportunities. Pearl has increased both choice and improved supply chain resilience
by increasing production levels available globally with the added benefit of ongoing technical
support provided globally by its fly-in fly-out R&D team.
Two major manufacturers are already utilising the new PearlBond adhesive product in their
manufacturing processes and are benefiting from both short delivery times and ongoing technical
support. This means manufacturers can adopt a more efficient ‘Just-In-Time’ (JIT) inventory model,
tying up less capital by reducing the quantity of stock on hand at any one time. Pearl intends to
continue its product roll-out beyond the Middle East region, with its sights set on South-East Asia,
Europe, Africa, and North America.
The new PearlBond product is commonly used as a binder for running tracks, children’s playground
mats, and garden tiles, with a range of other outdoor use cases. PU-based adhesives are also used in
sandwich panel insulation manufacturing as a lamination adhesive, as well as a roof adhesive for a
range of construction applications and wood binders for structural uses. Further applications are
lamination adhesives used in the packaging industry.
Kapil Deshpande, sales head CASE-applications of Pearl
Polyurethane Systems with a drum of the new PearlBond adhesive product
Kapil Deshpande, sales head CASE-applications at Pearl Polyurethane Systems commented, “When
compared to competing rubber and thermoplastic materials, polyurethane-based adhesives can
provide a more cost-effective and durable solution suitable for moulding and processing equipment
when formulated accordingly. This is exactly where the new PearlBond adhesive can help.
“However, our main point of difference is our agility and the ongoing technical support provided by
our experienced R&D team, which provides support to manufacturers in real time using video
conferencing or on a fly-in fly-out basis – especially important when urgent production or application
process needs arise. It is this type of agility and quick response times that are resonating with
manufacturers and end users around the world. By increasing production of PU-based adhesives, we
can react more quickly to customer needs and protect against the risk of delivery delays, enabling
manufacturers around the world to forecast their production plans further into the future.
“Furthermore, a key advantage is our central location in Dubai providing moderate energy costs,
affordable labour, access to optimised raw material sourcing, and excellent connectivity with dropped
shipping rates. We are thrilled by the positive feedback so far which has exceeded our expectations
and resulted in increased orders of our new PearlBond adhesive product.” concluded Deshpande.
In 2021, Pearl’s R&D team won the ‘Innovative Insulation Project of the Year 2021’ award for the first
R&D initiative of its type launched in the Middle East, and again this year for launching its new, more
sustainable EcoPearl insulation product which achieved an overall improvement of up to 20 per cent
in insulation performance over comparable products. In doing so, Pearl is enabling the construction
industry to play its part in the fight against global warming.
Operating since 1996, the company has supplied polyurethane systems for several trailblazing
projects in the Gulf region, including Palm Jumeirah, Downtown Dubai, and Ski Dubai in Mall of the
Emirates, and more recently, the Germany Pavilion at Dubai Expo 2020 and, Bustanica, the world’s
largest vertical farm for Emirates Airlines flight catering in Dubai.
Pearl Polyurethane also offers a comprehensive range of polyurethane formulations and prepolymers
for the production of high-performance polyurethane foams and elastomers.
About Pearl Polyurethane Systems
Pearl Polyurethane Systems LLC, based in Dubai, is the largest system house in the Middle East and Africa
providing customised solutions for all major polyurethane applications and foam systems.
Pearl Polyurethane offers a comprehensive range of polyurethane formulations and prepolymers for the
production of high-performance polyurethane foams and elastomers.
Formerly known as Bayer Pearl and Pearl Covestro, the company has a proven track record of more than 25 years
in the Middle East region, with the company’s roots dating back to Otto Bayer – the German inventor of Polymer
in 1937.
The company provides products and solutions under a range of brand names that offer many benefits:
Polyurethane foam systems that have set the global benchmark in polyurethane foam insulation; Solid
polyurethane elastomers; Polyurethane systems used in the automotive and soft furniture industries to provide
soft and comfortable foam mouldings; and a range of other PU-based products in many fields of application.
Sustainability and research play an important role at Pearl Polyurethane. Polyurethane foams deliver superior
energy savings and reduce CO₂ emissions. With the aim of eliminating waste and ensuring continual use of
resources, the company’s circular economy policies empower its research and development team to constantly
innovate and ensure its products meet world-class standards while reducing impact on the environment.
February 21, 2023
Huntsman Announces Fourth Quarter 2022 Earnings; Approximately $1.2 Billion in Buybacks and Dividends in 2022; Huntsman Board Approves 12% Dividend Increase
Download as PDFFebruary 21, 2023 6:00am EST
Related Documents
Fourth Quarter and Recent Highlights
- Fourth quarter 2022 net loss of $91 million compared to net income of $597 million in the prior year period; fourth quarter 2022 diluted loss per share of $0.48 compared to diluted earnings per share of $2.73 in the prior year period.
- Fourth quarter 2022 adjusted net income of $8 million compared to adjusted net income of $195 million in the prior year period; fourth quarter 2022 adjusted diluted earnings per share of $0.04 compared to adjusted diluted earnings per share of $0.89 in the prior year period.
- Fourth quarter 2022 adjusted EBITDA of $87 million compared to adjusted EBITDA of $327 million in the prior year period.
- Fourth quarter 2022 net cash provided by operating activities from continuing operations was $297 million. Free cash flow from continuing operations was $211 million for the fourth quarter 2022 compared to free cash flow from continuing operations of $648 million in the prior year period.
- Repurchased approximately 9.1 million shares for approximately $250 million in the fourth quarter 2022.
- On February 17, 2023, the Board approved a 12% increase to the quarterly dividend.
- Huntsman has secured all regulatory approvals required to complete the sale of its Textile Effects division to Archroma, a portfolio company of SK Capital Partners. The transaction is expected to close on February 28, 2023. Huntsman expects the net after tax cash proceeds to be approximately $540 million before customary post-closing adjustments.
| Three months ended | Twelve months ended | |||||||
| December 31, | December 31, | |||||||
| In millions, except per share amounts | 2022 | 2021 | 2022 | 2021 | ||||
| Revenues | $ 1,650 | $ 2,112 | $ 8,023 | $ 7,670 | ||||
| Net (loss) income attributable to Huntsman Corporation | $ (91) | $ 597 | $ 460 | $ 1,045 | ||||
| Adjusted net income (1) | $ 8 | $ 195 | $ 636 | $ 726 | ||||
| Diluted (loss) income per share | $ (0.48) | $ 2.73 | $ 2.27 | $ 4.72 | ||||
| Adjusted diluted income per share(1) | $ 0.04 | $ 0.89 | $ 3.13 | $ 3.28 | ||||
| Adjusted EBITDA(1) | $ 87 | $ 327 | $ 1,155 | $ 1,246 | ||||
| Net cash provided by operating activities from continuing operations | $ 297 | $ 733 | $ 892 | $ 915 | ||||
| Free cash flow from continuing operations(2) | $ 211 | $ 648 | $ 620 | $ 589 |
| See end of press release for footnote explanations and reconciliations of non-GAAP measures. |
THE WOODLANDS, Texas, Feb. 21, 2023 /PRNewswire/ — Huntsman Corporation (NYSE: HUN) today reported fourth quarter 2022 results with revenues of $1,650 million, net loss of $91 million, adjusted net income of $8 million and adjusted EBITDA of $87 million.
Peter R. Huntsman, Chairman, President, and CEO, commented:
“In 2022 we delivered almost $1.2 billion of adjusted EBITDA and Free Cash Flow of over $600 million. We increased our dividend and in total returned approximately $1.2 billion to shareholders. We made great progress in our cost reduction programs to offset historically high inflation and energy costs and strengthen our core businesses. We also announced the agreement to sell our Textile Effects business, which we expect to be completed at the end of this month.
“Turning to 2023, we are optimistic that destocking will end in the first part of 2023 and fundamentals in our businesses will begin to modestly improve as we move through the year, but visibility into the second half is still low. We are seeing some green shoots in areas like China, automotive, and aerospace, but construction demand globally is still under pressure. Regardless of how much demand improves through the year, we will remain focused on delivering our previously announced cost reduction programs, returning cash to shareholders, and looking for strategic investments to improve our core business while maintaining a strong balance sheet. We look forward to updating you of our progress as we move through 2023.”
Segment Analysis for 4Q22 Compared to 4Q21
Polyurethanes
The decrease in revenues in our Polyurethanes segment for the three months ended December 31, 2022 compared to the same period of 2021 was primarily due to lower sales volumes and the negative impact of weaker major international currencies against the U.S. dollar, partially offset by higher MDI local prices. Sales volumes decreased primarily due to lower demand, particularly in our European and American regions. The decrease in segment adjusted EBITDA was primarily due to lower sales volumes, lower MDI margins, the negative impact of weaker major international currencies against the U.S. dollar and lower equity earnings from our minority-owned joint venture in China, partially offset by lower fixed costs.
Advanced Materials
The decrease in revenues in our Advanced Materials segment for the three months ended December 31, 2022 compared to the same period of 2021 was primarily due to lower sales volumes, partially offset by higher average selling prices. Sales volumes decreased primarily due to deselection of lower margin business and lower customer demand in industrial markets, partially offset by higher demand in our Aerospace market. Average selling prices increased largely in response to higher raw material, energy, and logistics costs as well as improved sales mix. The decrease in segment adjusted EBITDA was primarily due to lower sales volumes, partially offset by higher sales prices and improved sales mix.
February 21, 2023
My Toughest Challenge: Jerry Lebold of BASF Geismar
By
–
December 4, 2022
THE CHALLENGE
One thing BASF’s Jerry Lebold has learned over the years is the importance of having the right team with the right skills and talents.
That’s particularly important now, given the wave of retirements impacting the industry. “There’s a lot of knowledge that gets lost when someone who has worked for 30 or 40 years retires,” Lebold says. “Our challenge is knowledge retention and getting new team members to learn from that.”
Another hurdle—a cultural preference for four-year college degrees over manufacturing careers. “Students today want to work for Google or Microsoft or Tesla,” Lebold says. “Many of them don’t recognize the opportunities that manufacturing provides in their own backyard. It’s simply a failure to get the word out, and that’s unfortunate given the urgent need for skilled, capable team members and the proliferation of manufacturing jobs.”
THE RESOLUTION
Lebold has learned that the best way to change that perception is through a system of constant engagement. BASF starts early by grooming its future workforce while they’re still in elementary school.
“When I came here three years ago, I began to notice a real value in engaging our local schools,” he adds. “In Ascension Parish, we start very early with kids in the 4th grade. We sponsor the BASF Kids’ Lab at the Louisiana Arts & Science Museum, and we get them excited about the possibilities of a future in STEM.”
It doesn’t stop there. The company targets rising juniors and seniors through its BASF Tech Academy, whereby students visit the Geismar site for a week and are exposed to a variety of jobs in manufacturing, such as process technician, engineering or the skilled trades.
“Later, we offer them mentorships, internships and scholarships, while also guiding the curriculum at local community colleges and universities through advisory panels. That way, we ensure that the programs they’re offering put students in the best position to get hired.”
Lebold’s hope is that BASF will keep students in the local communities “constantly engaged” throughout their education. “In doing so, we’re creating a local pipeline,” he adds. “We hope to see those students who first came to BASF Kids Day in 4th grade also go through the TECH Academy as high schoolers, then eventually land a summer internship and even a full-time job.”
Upon attracting top talent, BASF shifts its focus to retainage through its learning and development program and learning coordinators. In the process, they promote the continuous development of those skillsets.
THE TAKEAWAY
Over the last three years, Lebold has broadened his diversification efforts by focusing more on local minority communities, as well as attracting more women to the manufacturing sector. “I think there’s a great opportunity to work with local underserved communities so that they’re aware of the jobs and opportunities, then put them in a position so that they can successfully be a part of this industry up and down the river,” he adds.
BASF has begun working with advocacy groups in the region such as the Greater Baton Rouge Industry Alliance, Louisiana Chemical Association and Louisiana Association of Business and Industry to make it happen. “We’re in the early stages of trying to figure out what that looks like, but I think it gets solved collaboratively and with the industry as a whole,” he adds.
“We have to look at those hurdles that are preventing these kids from advancing. We’re going to need operators, millwrights and technicians … so we need to work right here in this region to make sure we provide those opportunities.”
February 19, 2023
Wanhua Chemical Launched a Molded Pallet Solution with MDI-based Binder
TIME ：2023-02-17
Wanhua Chemical has introduced an MDI binder-based molded pallet solution. The molded pallets use wood and crop waste as raw materials, and are recyclable through shredding and pressing processes.
The MDI-based binders provide high bonding strength and have higher moisture tolerance. Compared to conventional solution, the new solution significantly reduces the amount of binder usage.
During pallet production, the binder requires less heating for preparation, and required time for heat-pressing is reduced by 50%, thus saving electricity consumption and reducing carbon emissions.
The formaldehyde-free molded pallets reduce VOCs in production, benefiting the health of both workers and end-users.
The molded pallet with MDI binder provides a new option for logistics and packaging. Wanhua Chemical is committed to making its products more low-carbon, environment-friendly and high-performance, and becoming a supplier of high-quality solutions.
https://en.whchem.com/cmscontent/638.html
This is probably easier than trying to recycle wood pallets, with all the nails, etc.
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