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VOLUME XXI

September 14, 2023

Everchem’s Closers Only Club

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

February 28, 2024

Chemical M&A to Accelerate

Chemical Sector to See Increased M&A Momentum, Brenntag’s CEO Says

Published: Feb. 27, 2024 at 10:02 a.m. ET

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By Stefanie Haxel

The global chemical sector might see increased momentum in mergers and acquisitions, according to Brenntag’s chief executive officer.

The head of the German chemicals company, Christian Kohlpaintner, said in an interview with Dow Jones Newswires that dealmaking in the chemical industry seems to be accelerating, as reflected in the size of acquisitions being implemented.

“If you look at the top 50 distributors, in a short period of time, I would say in the last seven or eight years, they have increased their market share from 30% to almost 40%,” Kohlpaintner said, which he accredits to aggressive acquisitions.

Brenntag had doubled its acquisition budget in the fall of 2022 to between 400 million and 500 million euros ($434.1 million-$542.7 million) a year.

Although many players in the industry have grown significantly through acquisitions in recent years, the economies of scale aren’t enough to have a positive impact on manufacturers.

“This is the reason why, in our opinion, the consolidation of the market will occur at a higher speed and in larger steps,” Kohlpaintner said.

According to data from the Boston Consulting Group, the market for industrial chemicals is growing between 2% and 4% annually, and that for specialties is growing by 3% to 5%.

–Nina Kienle contributed to this story.

Write to Stefanie Haxel at stefanie.haxel@wsj.com

https://www.marketwatch.com/story/chemical-sector-to-see-increased-m-a-momentum-brenntag-s-ceo-says-99bbc6d3

Yantai ascends beyond trillion yuan milestone with eye on sustainable innovation

2024-02-26 08:26:59

In a landmark achievement for 2023, Yantai’s GDP soared to 1.02 trillion yuan (approximately $141.31 billion), making it the third city in Shandong and the 26th in China to surpass 1 trillion yuan.

The city’s ambitious strategy for acquiring projects has yielded remarkable results, with 485 projects signed into effect and 89 policies implemented in 2023, both record highs. These achievements have notably improved Yantai’s business environment, earning it a spot among the top 10 cities in China in terms of business climate.

Innovation is at the core of Yantai’s economic agenda, with significant investments made in critical sectors like aviation, nuclear power, and marine equipment.

The Yantai Chemical Industrial Park, nestled in the Huang-Bohai New Area, epitomizes the city’s ambition for upscale, sustainable production. The park has outlined an annual investment of 40 billion yuan across 40 city-level industrial projects, all of which have kicked off construction, with 11 billion yuan already invested, providing a strong foundation towards meeting this year’s objectives.

Home to global industrial giants, the park is poised to exceed 200 billion yuan in output within the next five years, highlighting Yantai’s dedication to green, low-carbon development and innovation.

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The Wanhua Chemical in Yantai Huang-Bohai New Area. [Photo by Guo Chuanyi for chinadaily.com.cn]

Yantai’s commitment to sustainability is further demonstrated by the Laishan floating photovoltaic power station, China’s first sea-based floating solar power facility. This groundbreaking project, developed by CIMC Raffles, marks a significant leap forward in clean energy, with the capacity to power numerous homes and underscoring Yantai’s leadership in renewable energy innovation.

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An aerial view of the “Genghai No 1” marine ranch complex located in the waters of the Laishan district. [Photo by Yu Fengyuan for chinadaily.com.cn]

In Longkou city, there has been a noticeable shift towards high-end manufacturing, as the traditional automotive industry transitions to new energy vehicles and other advanced sectors. The rapid growth of China’s automobile exports is evident in this area, with pure car and truck carriers manufactured at the CIMC Raffles Longkou base recently shipped from Longkou Port to Shenzhen via Yantai. They were carrying over 5,000 domestically produced new energy vehicles destined for Europe.

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The shipyard production line of CIMC Raffles is engaged in the manufacturing of pure car and truck carriers. [Photo by Xie Hongyu for chinadaily.com.cn]

Yantai’s industrial strength and innovative spirit position it for continued success, solidifying its status as a leading city both regionally and nationally.

With a vision set on becoming a central city in the Huang-Bohai region by 2035, Yantai is fast-tracking the development of a green, low-carbon, and high-quality development model city, marking a new chapter of ambitious goals and sustainable growth.

https://sdxw.iqilu.com/w/article/YS0yMS0xNTQwOTk4Mg.html

BASF SE (BASFY) Q4 2023 Earnings Call Transcript

Feb. 23, 2024 8:33 AM ETBASF SE (BASFY) Stock, BFFAF Stock

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Call Start: 04:30 January 1, 0000 5:40 AM ET

BASF SE (OTCQX:BASFY)

Q4 2023 Earnings Conference Call

February 23, 2024 04:30 ET

Company Participants

Stefanie Wettberg – Investor Relations

Martin Brudermuller – Chairman

Dirk Elvermann – Chief Financial Officer

Martin Brudermuller

Good morning, ladies and gentlemen. Dear gentlemen, I would like to welcome you to our analyst conference call. On January 19, BASF released preliminary figures for the full year of 2023. Today, we will provide you with further details.

Let’s start with the development of chemical production by region. The orange bar in the middle shows the growth for the full year 2023. Based on the available data, global chemical production grew by 1.7% in 2023 on account of growth in China. In 2023, chemical production in China increased considerably compared with the COVID-related low baseline of the prior year. The development there was driven by recovering domestic demand and exports, but was associated with low sales prices. All other regions recorded a decline.

In Europe and in Asia, excluding China, chemical production decreased substantially due to lower demand resulting from high inflation, frontloading of durable goods consumption during the COVID years as well as structurally higher natural gas prices. In 2023, natural gas prices in Europe were still around double the average between 2019 and 2021 and 5x higher than the Henry Hub quotation.

In North America, chemical production declined slightly compared with 2022 in an environment of weak domestic demand from industries and end consumers. In Q4 2023, global chemical production rose by 6.9%. This was a considerable increase mainly stemming from strong contribution from China. However, North America, Europe and Asia, excluding China, also grew slightly compared with the very weak prior year quarter. We now move on to BASF’s performance in the fourth quarter.

Overall, BASF group sales declined by 18% to around €16 billion in Q4 2023. This was mainly due to lower prices, which decreased across all segments because of subdued demand and in line with lower raw material prices. Currency headwinds also had a negative impact on sales. Sales volumes, however, remained almost stable. Excluding precious metals, BASF sales volumes increased by 2.6% compared with the prior year quarter. This confirms the bottoming out of the volume decline, which we had predicted in our analyst conference calls in the second half of 2023. EBIT before special items declined by €81 million and amounted to €292 million in Q4 2023. Higher earnings in the Industrial Solutions, Nutrition & Care, Surface Technologies and Materials segments could only partially compensate for lower contributions from Agricultural Solutions, Chemicals and other.

Today, I would like to additionally comment on our earnings performance by region. In 2023, an extremely difficult market environment with low demand, EBIT before special items declined by double-digit percentage in all regions. However, our teams delivered a positive earnings contribution in absolute terms in all significant countries with the exemption of Germany. Results in Germany suffered due to a substantially negative earnings at our largest production site in Ludwigshafen. On the other hand, this situation demonstrates the high competitiveness and under challenging conditions at the global level. On the other hand, the negative earnings at our Ludwigshafen site show the need for further decisive action here to enhance competitiveness.

At BASF, we have a track record of taking immediate action when we recognize developments that will have a lasting impact on our cost competitiveness. In October 2022, BASF was one of the first chemical companies to initiate a significant cost savings program to address the deteriorating competitiveness in Europe and Germany, in particular. This was done mainly in view of the significant increases in electricity and natural gas prices.

Consequently, in February 2023, we launched a set of measures to save costs in non-production areas in Europe and to adapt production structures at the Ludwigshafen site. As confirmed in our Q3 2023 reporting, total annual cost savings from all the measures announced to-date are expected to reach €1.1 billion by the end of 2026. At the end of 2023, we already achieved an annual cost reduction run-rate of around €0.6 billion from these measures. Onetime costs amounted to around €0.4 billion in 2023, which explains the limited P&L impact so far.

In the course of 2023, earnings of our largest product site in Ludwigshafen deteriorated further in an extremely weak market environment. There are two main reasons for that: first, the temporary low demand environment, which is affecting the volume development in both our upstream and our downstream businesses; and second, higher production costs due to structurally higher energy prices, which predominantly burden our upstream business.

The Board of Executive Directors is fully aware of the significant restructuring, cost reductions and efficiency improvements that our BASF team has implemented over the recent years, especially in Ludwigshafen. However, we must also acknowledge that the framework conditions continuing to be challenging, particularly for the upstream businesses in Germany. And these conditions are not expected to improve anytime soon because they have become structural.

To restore and defend our international competitiveness, we must rigorously address these new market realities. Therefore, we have decided to introduce additional measures to adapt the cost structures at our Ludwigshafen site. We aim to reduce costs annually by a further €1 billion by the end of 2026. The program will generate cost savings in both production as well as in non-production areas. It will include further reducing fixed costs by driving efficiency in company structures, adapting production capacities to market needs, and significantly trimming variable costs by redesigning processes.

The situation is serious, so we are explicitly not rule out any measures. The program will also lead to further job cuts. As usual, we will involve employee representatives regarding the various measures that will be further detailed in the coming months. The measures already announced in October 2022 and February 2023 will achieve another €0.5 billion in annual cost savings by the end of 2006. The total one-time costs for these measures as well as for the further program are expected to be up to €1.8 billion.

Besides the required cost reductions, we will do everything possible to increase the utilization rate of our competitive assets to bring them back to normal levels. In doing so, we aim to generate additional contribution margins to return to solid earnings at the Ludwigshafen site. This applies particularly to our upstream assets in the Chemicals and Materials segments, where plants require constantly high utilization rates of 80% to 90% to achieve industry typical earnings.

Currently, we are operating with utilization rates considerably below normal levels at the Ludwigshafen site. The low level of global market demand we are experiencing at the moment will, however, not continue over the long run. Sooner or later, customers will increase their orders again and markets will normalize. We at BASF will be ready to serve the increasing demand from our customers and earnings contributions will improve accordingly.

Historical data show that even under price pressure, such as step-up in utilization rates, will quickly lead to an increase in contribution margins. The chemical industry will be the first to benefit from reviving demand since we supply materials to the manufacturing industries at the beginning of almost all value chains. In parallel to the short-term program announced today, Marcus Kamit and the new Board team will update the longer term positioning of the Ludwigshafen site. This will reflect both the regulatory framework and the changed market realities in Europe and Germany. The target picture will give a clear strategic direction for the structural development and will set ambitious profitability targets.

The Board will provide details in the second half of 2024. What is undisputed is that the Board team stays strongly committed to the Ludwigshafen site. We want to develop Ludwigshafen into a leading low CO2 emission chemical production site with high profitability and sustainability. We will focus Ludwigshafen on supplying the European market to remain the partner of choice for our customers. To achieve this, it is essential that we implement the program consistently and as quick as possible. At the same time, we are systematically driving forward our business in those regions of the world that are growing more dynamically and offer attractive conditions for investments.

https://seekingalpha.com/article/4672905-basf-se-basfy-q4-2023-earnings-call-transcript?mailingid=34449244&messageid=2800&serial=34449244.744

Huntsman Corporation (HUN) Q4 2023 Earnings Call Transcript

Feb. 22, 2024 4:56 PM ETHuntsman Corporation (HUN) Stock

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Q4: 2024-02-21 Earnings Summary

EPS of -$0.21 misses by $0.06 | Revenue of $1.40B (-14.97% Y/Y) beats by $48.39M

Huntsman Corporation (NYSE:HUN) Q4 2023 Earnings Conference Call February 22, 2024 10:00 AM ET

Company Participants

Ivan Marcuse – VP of IR & Corporate Development

Peter Huntsman – Chairman and CEO

Phil Lister – CFO

Peter Huntsman

Ivan, thank you very much. Thank you for joining us this morning. Last evening, we released our prepared remarks for the fourth quarter 2023 results. Before opening the call to questions, I’d like to take a few minutes and share with you our latest plans and views as we enter the second half of the first quarter.

At the outset, I remind you that we have complete financial results for the month of January, but still have two more months until we know the full results of the first quarter. I’m also still a bit haunted by the ghost of a year ago when many of you and most companies were projecting 2023 to have a weak beginning but a very strong second half, second half proved to be nothing short of a disaster.

Let me begin by sharing with you our five main goals for this year. First, we will be — this will be a year wherein we will recover some lost sales from 2023. A year ago, we showed strong pricing discipline early in the year and in many cases, we held the line and kept pricing from falling faster than they otherwise would have. In some cases, we lost business competition who are pushing volume over value. Going forward, we will be pushing much needed price increases in most of our product ranges, but we will also be negotiating to get back some of that lost volume.

Our second priority would be to improve our free cash flow generation. This will be at the top of our incentive pay targets for 2024. We will do this through a continued focus on working capital controlling both indirect and direct costs and moving more volume and higher prices.

Our third priority is to maintain discipline in our cost structure. We will complete our previously announced cost reduction programs in each of our divisions and our corporate functions. We will also be focused on offsetting projected 3% to 4% inflation increases.

Our fourth priority will be to continue as we have for the past several years, assessing our portfolio on an ongoing basis to ensure that we are the best owners for the businesses and assets that we have. We will continue to look for M&A opportunities to expand our more differentiated downstream businesses.

Lastly and most importantly, we will invest to continue improving our environmental and safety stewardship and our operating reliability. This focus on managed risk will also apply to our investment-grade balance sheet.

Our Board of Directors remains committed to returning cash and value to our shareholders. To this end, we will be raising our dividend by 5% to share to $0.25 a quarter. While we do not plan to buy back any shares in the first quarter, we look forward to restarting our buyback program as soon as market conditions warrant.

As I said at the beginning, it is still too early in the quarter to make bold predictions. However, the order patterns that I’m seeing in most areas of the world tells me that in most of our divisions, we have seen the end of a very long period of inventory drawdowns and prices and volumes look to be gradually improving.

With the restarting of China’s economy post New Year celebrations, I feel more optimistic than I did at year-end and see more proverbial green shoes than I have over the past 12 to 18 months. We have a lot of recovery before us, but I believe we’re taking the right steps in the right direction.

Mike Sison

Hey, good morning. Peter, volumes in polyurethane seem to have stabilized a bit in the fourth quarter. How do you think volumes sort of unfold in the first quarter? Or are you — you had sort of mentioned that order patterns look a little bit better. And then when do you think we can see an inflection point for growth in ’24?

Peter Huntsman

Well, I think that, again, you’re going to continue to see a gradual improvement throughout the first quarter, both in pricing and in volume. When I look at it on a prior year basis, I would imagine we’ll probably be seeing an improvement in the first quarter, again, just looking at order patterns today and so forth. Probably around mid-single digit sort of growth. And that’s going to be pretty much across the board.

We’re looking for growth to take place as we’ve seen the cessation of deinventoring in North America around housing and construction. And in China, we continue to see a bit of a rebound in construction, but mostly in automotive and mostly as we look at infrastructure projects. And in Europe, well, I think we’ll just see a continued gradual recovery across the board in Europe.

Mike Sison

Got it. And then if volumes do recover, what do you think needs to happen to shore up sort of either pricing or profitability and maybe give us a thought on what the Polyurethane segment should be able to do longer term in terms of sort of margins and earnings power?

Peter Huntsman

Well, I think MDI, I’ve not seen anything structurally that has changed in MDI. This is a mid- to upper teen sort of business during its normalized basis. And when you see MDI capacity utilization, usually somewhere in the mid- to upper 80s, particularly the upper 80s, pushing 90% you’re going to see pricing power. I think the industry today globally is somewhere in the low 80% capacity utilization with a little bit of an improvement over what we’ve seen in previous quarters.

I remind you that the last quarter, we were talking about global operating rates being probably in the mid [indiscernible] so we are seeing a bit of an uptake there. And — but we need to see sustainability. Again, last year, at this time, we were talking about a stronger second half of the year and so forth. And I think that what’s going to be important this time or this year is that we just see a long steady recovery in volume and allowing us to recover the pricing as well. And I would say that across the board in virtually all of our products, not just MDI.

John Roberts

Thank you. You decided that you’re going to restart your smaller Geismar unit. Maybe it didn’t sound like that was maybe quite justified yet. Maybe that should come a little bit later, but maybe you can talk about where you think that volume is going to go.

Peter Huntsman

Yeah. That’s 100 — I’d remind you, it’s 130,000 tons of volume, roughly 250 million pounds. And so we’re looking at that sort of volume being a relatively small percent increase in the overall scheme of things.

I would just say, too, that as we look at restarting that, it does take you time to restart an asset like this probably could take as long as throughout the entire quarter going into the second quarter. Second quarter is usually a pretty strong demand for OSB, CWP, insulation, our building materials. And just because we’re operating in that line, it doesn’t mean that we’re going to put all 130,000 tons into the market on day one. That will gradually be fed into the market as a market needs and so forth. But we looking at today’s order patterns, what we’re hearing from our customers and so forth, we feel that we need to start that asset up.

Phil Lister

John, we been operating globally at between 75% to 80%, the markets in the low-80s. So that should give you some indication that we’re simply moving up to the market levels.

David Begleiter

Good morning. Peter, just on MDI, what would it take to return to mid-cycle operating rates in MDI? And is there a path forward to a peak later in this decade?

Peter Huntsman

I think that as we look at — we kind of look at the three regions. I think that as we look at the U.S. housing market, I think that a recovery in housing to be at that 1.5 to 1.7 kind of where we were just a few years ago, which I think is still well below the 2 million level that people are saying is kind of a sustainable rate.

If we look at housing, that recovery of housing. And I think, again, it’s — what was really painful over the last year and half was the deinventory that took place. It wasn’t necessarily a housing drop to 900,000 units or something like we saw during the Great Recession. It was a massive amount of deinventory that took place and how much inventory within the system when that the inventory started.

So I think in North America, it’s going to be a lot around housing. I think that as we look at Europe, it’s going to be — excuse me, as we look to Asia, it’s going to be around continued pull that in automotive, for us, both ICE and particularly EV have been very strong end markets for us in urethanes in China. China continues to improve as we have pointed out in the last couple of quarters that it would. But we’re certainly not seeing from an overall macro point of view. The 5%, 6% growth that we’ve seen in past years. So I think that’s going to be important.

And then Europe, I think Europe is going through, particularly in Germany, something of a deindustrialization right now. And I think Europe needs to find incentive courses to — do they want to continue this insanity that they’re going through or do they want to really have policies and priorities that are going to encourage manufacturing and where they’re going to be going in that area.

But Europe for us in building materials, insulation, lightweighting, automotive and so forth, those are — some of those are doing fairly well right now. We’re seeing a gradual recovery in automobiles and so forth, insulation, but we need to see more coming out of Europe.

So again, I think all of those indicators are going in the right direction right now gradually some faster than others. We just need to see it sustainably keep moving in that area.

Alex Yefremov

Thank you. Good morning, everyone. Just to piggyback on the last question, in your polyurethane segment, you’re expecting better margins in the first quarter. Should we think about that level of MDI margins in Q1 as sort of the baseline for ’24 or could those margins dip again in Q2 because we now see benzene rising, for example, maybe you won’t have enough pricing. But do you feel comfortable that at the very least, that Q1 level of MDI margins would not slip lower?

Peter Huntsman

Well, I’d like to say that we have that much control in pricing for the entire year and that we have that good of forecasting. But as we look at — and I’m focused right now as to how Q1 is ending and how Q2 is going to be starting. And as I look right now at some of the broader indicators, Europe were out with a price increase effective March 1 of €250. These are public announcements of €250 a ton Chinese — on the post New Year’s, which ended just this past week, we’ve seen a pretty strong demand, both in volume and in pricing that’s been publicly reported of around $150 a ton. In the U.S. will be pushing for $400 a ton price improvement in HBS now in our Huntsman Building Solutions.

We also have some formula pricing in the U.S., and we’ll be pushing for other price increases as well that are not public. So across the board. Now A lot of that’s going to be setting the last couple of days. We’ve seen benzene continue to be quite volatile. And we’ve got to make sure that our prices stay above the wave of raw material price movements. But by and large, we’re finishing first quarter in a much stronger position than we started first quarter on a pricing basis. And I would say that, again, some of that improvement, that optimism, I talked about in my prepared remarks at the very beginning, literally, we’ve seen that really starting to come just in the last couple of days. We see some of the actions that have taken place in China and so forth.

So again, some good optimism going into the second quarter. I feel like it feels we’ve got the wind in our sales. But again, we’ve — unfortunately, we’ve —

Unidentified Analyst

Hi. This is Adam on for Arun. Looking into second and third quarter, looking at polyurethanes and wondering other than some of the items you’ve just outlined, what might you think are some of the upside drivers beyond seasonality for that segment? Thank you.

Peter Huntsman

I believe it’s going to just be a continued growth in demand, stability in raw material prices and discipline and finished product pricing. It’s just getting back to the basic fundamentals. A little bit of restocking would also help. I think that inventories are very low. And throughout polyurethanes as well, we’ll be completing our cost savings program throughout 2024. So we’ll see some of the benefits that have fall to the bottom line.

Kevin McCarthy

That’s really helpful. And then second, Peter, if I may, I wanted to ask about your view on China. I think you made a comment that you’re more optimistic today than you were at year-end. Year-end was not too terribly long ago. So I’m just kind of curious, is it to do with a little bit of MDI uplift that you referenced earlier? Or are you seeing other signs in China that are more encouraging to you, more green shoots. Maybe you could elaborate a little bit on the regional outlook there.

Peter Huntsman

Yeah. I’m not sure that my view necessarily have changed all that much. I always get a little bit leery when you go into Chinese New Year because it seems like you come out of it and you’re either off to the races or it seems like things shift — the New Year’s ends and things just remain target.

That’s kind of what we’ve seen over the last two years or so, China is struggling through COVID and then a rather lethargic recovery in the last year. I see them coming out of this new year, just in the last week. And again, I don’t want to base a whole year on a week of demand and pricing and so forth. But I think what we’re seeing in market conditions in real time, Kevin, is we’re seeing a better rebound, if you will, after the Chinese New Year than we’ve seen over the last two or three years. And this is kind of the China that we were used to a couple of years ago.

So again, I’m not saying these guys have changed drastically, but I do think that the pickup that we’re seeing in our particular business on EVs. And as we look at some of the demand that is picking up in China, in particular, it feels like it’s real and it continues to see a gradual steady improvement.

Phil Lister

And Kevin, for context, about 15% to 20% of our sales are into China and less than 10% into property, which has obviously been the big headline coming out of China and how far that’s fallen.

Turner Hinrichs

Great. Thanks for the color. So you’ve mentioned that you anticipate stronger pricing in the first quarter in polyurethanes. Could you walk us through what you’re seeing in each region as it relates to polyurethanes pricing and what you’re expecting for underlying supply and demand?

Peter Huntsman

Well, again, some of the broader things that we’re seeing in China, I would just say that we’re seeing around $150 a ton improvement. China, unlike Europe and the U.S. will set a price out. China moves really almost on a daily basis, on your base and more commoditized polyurethanes, your downstream urethane blends and more differentiated urethanes are usually going to follow that macro movement in pricing. But as we see pricing today in China, we see that up around $150 a ton improvement over what we’ve seen in the past couple of weeks.

And as we go to Europe, again, we’re out with a $250 a ton improvement in Europe. And again, when I say that, that’s not to say that you take all of our volume and put $250 a ton of that. Some of that will be effective March 1. Some of it will be a little bit later than that. Some of it, depending on contracts and so forth and in place, maybe more, maybe less than that $250 directionally, that’s where we see pricing going in the European market. And that’s obviously is very much needed, particularly in the European market.

In the U.S. market, again, we’re seeing a number of areas with the splitter that we have in place, we see kind of more of a fragmented base in Europe. We sell a lot internally down through the Huntsman Building Solutions. We have a bunch of our product that’s on pricing formulations and so forth. We were able to pass through raw material volatility and increases. And we have some that are just on stand-alone contracts with prices that we negotiated on a quarterly or monthly basis.

But we are pushing for a broad price increase on the North American market as well in MDI.

Phil Lister

And to your question on utilization, we still expect it to be in the low 80s in the first quarter. We’re not up to the seasonal highs of construction in the second quarter. And as we said earlier, the polyurethane industry really needs to get into that 85%-plus utilization before you see a real inflection point when it comes to supply demand.

Matthew Blair

Sounds good. And then regarding the U.S. construction market, at least from paper Housing starts were pretty good in the fourth quarter of 2023, up 6% after some big declines earlier in the year. Did you see that come through in your Q4 results? And Paul, urethane, so just pretty soft due to weakness in other regions? Or should we be thinking about a lag, if housing starts improve in 1 quarter, maybe it takes like one or two quarters for that to flow through to Huntsman?

Peter Huntsman

Yeah. Let’s remember that the time from permitting to purchasing, to building inventory the impact of that entire supply chain is not an instantaneous issue. And companies today are looking at where they’re going to be in second quarter and in some cases, third quarter, they’re looking at what the demand is going to be and projected to be. We’ll see things like mortgage rates will have an impact on how much inventory and pre-buying OSB and installation customers will be doing.

So there are a lot of variables. But again, as we look at it, if we step back and we look at it from a macro point of view, from what we’re hearing from our customers, the early indications that we’re seeing our indication internally as Tony said, it’s time to restart our line in Geismar and gradually start bringing that into the market. And we believe that’s going to be needed to satisfy demand. So that should tell you as much of our view going forward.

Hassan Ahmed

Good morning, Peter. In the sort of prepared remarks that you guys posted overnight for the polyurethane segment, you guys talked about I believe it was like a 6% volume gain in Europe, and you talked about some market share gains out there as well. Can you talk about the dynamic that’s transpiring over there with regards to this?

Peter Huntsman

Yeah. I would just remind you that we had our facility down earlier in the year, so we talked about where we were a year ago and where we were even a quarter ago. It’s pretty easy comps to beat. So I’d like to think that Europe is expanding GDP 6% per quarter. It’s going to continue like that. But again, there’s — I think there’s some fundamental issues around Europe on the broader economic perspective when you look at energy and industrial policy. But as we look at our customer base in Europe, we don’t see it getting any worse. We see, if anything, there’s perhaps a building tendency for restocking. And as we look at our facility there, it’s running well. And we’re continuing to see stability and gradual improvement there.

And hopefully, effective March 1 here, we’ll be successful in price increases.

Hassan Ahmed

Understood. Understood. And just sticking to the Polyurethane segment. I mean, obviously, EBITDA margins in Q4 were around 1.5% call it near breakeven. And you guys are relatively sort of low cost, downstream integrated and the like. Could you talk a bit about the global cost curves I mean, I’d like to think that a large chunk of the industry is loss-making right now. I mean how sustainable is that really, should we be seeing sort of curtailments now and pricing increases in theory that would ensue thereon after?

Peter Huntsman

Well, it’s — I mean just going around the world, the lowest-cost producers globally right now are in China. And you’ve got low energy costs in China with the amount of coal that’s being consumed and the coal-based economy largely. And that’s going to be where you’ve got the largest newest facilities, and so you’re going to have the lowest cost coming out of China.

Second on that cost curve is going to be the U.S. I believe our positioning in the U.S. is that — I’m not going to sit here and say that we are the lowest cost producer in North America, but I would be surprised if anybody is lower than us. I don’t know the exact economics of our competition. But I think between our reliability and the size of our facility and so forth, we would be among the lowest cost producers in North America. And I would say that when I look at the profitability in North America, while it’s improving, these are not long-term sustainable margins. We need to see better market conditions, pricing and demand.

And then when I go to Europe, Europe is one cold winter or one sold pipeline or on import terminal problem away from an energy spike as we saw in the summer before Putin’s invasion as we saw in the winter of Putin’s invasions, we’ve seen since then where energy prices can spike up 5, 10 times in a very short period of time.

So Europe needs to figure out what their energy policy is going to be and it have an economy of that size based on the means of propulsion that Columbus used 700 years ago is insane. And they’ve got to figure out what they’re going to do from an energy point of view and from an industrial point of view. And whether they can do to compete. When you look at the margins over the last two years, in particular, I think that I publicly have said it if I haven’t, then I should, we haven’t made we haven’t made strong cash flow out of Europe in almost two years. That’s unacceptable, and it’s unsustainable.

So if we’re in that position, even if our competition, I believe, again, in Europe, we may not be the lowest, but I bet we’re very close to the lowest cost producer. There’s no way that an MDI company is operating a European market economics today and says we’re making a strong return on capital, and we’re proud of what we’re doing today.

Europe, just — so yeah, Hassan, I’m happy to where the direction that the markets are going, demand is picking up, pricing is picking up. I don’t mean to get on tire here, but we’ve got a long way to go, and there’s a lot of work that needs to be done. I think we’re heading in the right direction. But I still – Europe probably ask me more worried than the U.S. and Asia.

Salvator Tiano

Thank you very much. I just want to come back to the U.S. MDI market first. So firstly, it seems like you have some pretty steep price increase you mentioned correctly. If I heard correctly, around $400 a ton in the U.S., but some trade publications even last night are still differentiating between U.S. and European and Asia conditions saying the demand and supply are much, much looser here. So what are you seeing that’s making you quite more optimistic than, I guess, trade consultants here? And also on the Geismar startup in Q2, can you discuss a little bit what would be the cost associated with that? And what is the minimum operating rate that you need to run in order to be profitable on an EBIT or an EBITDA level?

Peter Huntsman

Yeah. When we talk about the $400 a ton, I will just remind you that’s what we’re shooting for in our HPS business. So we take our own MDI internally, we transfer it to HBS, we price at market and then we sell that to customers. And we’re seeing — we’ve been public. And I only want to talk about price increases that we have that are public.

As we think about what the trade is saying versus what we’re saying, well, the difference — you asked what the difference is between those one sells paper and one sells product. And we sell product. And so I can only comment on what we’re seeing, what our customers are seeing, the feedback we get from our customers and reality on pricing.

Trade publications, I think, are a good snapshot on the macro basis. But I wouldn’t say right now that MDI in the U.S. is long and sloppy in pricing. I’d say it’s that were the case, we wouldn’t be shooting for the price increases in pushing for the price increases that we are. And I apologize, I forgot the latter part of your question.

Salvator Tiano

So just it was the second even to Geismar, if there will be any costs in Q2 associated with the start-up. And if — and what’s the minimum operating rate that needs to be — that you need to be profitable on an EBITDA or EBITDA basis.

Phil Lister

We will just — as we said, we’ll just bring that on slowly, make sure that we operate appropriately above 50% levels. So I mean you know these plants below those levels, then they tend to blue up. So to operate them efficiently, we’ll bring those on, but we’ll bring it on slowly. And we’ll make sure that we’re profitable and what we put into the market.

Salvator Tiano

Great. Thanks very much.

Operator

Our next question is from the line of Patrick Cunningham with Citi.

Eric Zhang

This is Eric Zhang on for Patrick. You’ve done a lot with polyurethanes on the cost optimization front. What do you think EBITDA margins can get to this year with maybe a modest volume recovery and store work prices? Thank you.

Peter Huntsman

I’d be reticent to throw out a margin number because I know whatever I say, I’m either going to be too high or too low. But I do think that we’ll be moving throughout the year, hopefully, again, unless we see a massive amount of restocking that happens very suddenly, which I’m not anticipating, but I think that we’re going to see a gradual improvement throughout the year.

And I hope that we finished the year much closer to our normalized levels of EBITDA than when we started the year. I know that’s a superfluous answer, but I think at this point, again, we’ve got the results of January and just simply too early in the year to make a year prediction.

Phil Lister

And as we said, cycle average margins, if you go back over the last 10 years, this is a mid-teens plus margin business.

https://seekingalpha.com/article/4672622-huntsman-corporation-hun-q4-2023-earnings-call-transcript?mailingid=34443094&messageid=2800&serial=34443094.279

February 22, 2024

The Latest from Adnoc

Adnoc to Progress in Covestro Talks Ahead of Potential Bump

Eyk Henning and Dinesh Nair, Bloomberg News

Colored foam samples made from toluene diisocyanate (TDI) sit in this arranged photograph at the Covestro AG chemical park in Dormagen, Germany, on Wednesday, May 9, 2018. Bayer AG sold its remaining stake in Covestro, raising 2.2 billion euros ($2.6 billion) as the German drugmaker closes in on the planned $66 billion purchase of genetically modified seeds supplier Monsanto Co. Photographer: Dario Pignatelli/Bloomberg

Colored foam samples made from toluene diisocyanate (TDI) sit in this arranged photograph at the Covestro AG chemical park in Dormagen, Germany, on Wednesday, May 9, 2018. Bayer AG sold its remaining stake in Covestro, raising 2.2 billion euros ($2.6 billion) as the German drugmaker closes in on the planned $66 billion purchase of genetically modified seeds supplier Monsanto Co. Photographer: Dario Pignatelli/Bloomberg , Bloomberg

(Bloomberg) — Abu Dhabi National Oil Co. is inching toward an improved bid for Covestro AG after finding a potential way to resolve the impasse over its €11.3 billion ($12.1 billion) pursuit of the German chemical maker, people familiar with the matter said.

Adnoc is working with a consulting firm that’s sent dozens of questions to Covestro about the details of its operations, according to the people. The responses could give the Abu Dhabi-based energy giant enough information to improve its bid to slightly more than €60 per share, the people said, asking not to be identified because the information is private.

Shares of Covestro jumped as much as 8.1% in late Frankfurt trading Thursday. They were up 4.8% at 5:35 p.m. in Germany, giving the company a market value of about €9.4 billion.

In December, Adnoc improved its non-binding offer to €60 per share, up from previous proposals of €57 and €55, Bloomberg News has reported. The latest increase wasn’t enough to win over some parts of Covestro’s supervisory board, which thus hasn’t granted Adnoc full access to its data room, the people said. 

While Adnoc executives were struggling to justify another bump without access to proper due diligence, Covestro’s responses to the latest questions may help bridge the gap, the people said. It’s still unclear how much Adnoc may be willing to increase its bid and whether it will be enough to win over Covestro.

Deliberations are ongoing, and there’s no certainty they will lead to a deal. Representatives for Adnoc and Covestro declined to comment.

Adnoc has been pursuing Covestro since the middle of last year, part of the Abu Dhabi company’s push to diversify internationally. Its overtures come as the European chemical industry struggles with the region’s anemic growth and a weaker-than-expected rebound in China.

Producers including Lanxess AG and BASF SE warned of disappointing earnings last year. Covestro will announce its full-year results on Feb. 29, when investors also expect it to provide an outlook for the current year and beyond. 

Covestro indicated in November it’s on track to generate about €1.4 billion in earnings before interest, taxes, depreciation and amortization in 2024, well below the €2.8 billion it said it could achieve under average market conditions. 

(Updates with share movement in third paragraph.)

https://www.bnnbloomberg.ca/adnoc-to-progress-in-covestro-talks-ahead-of-potential-bump-1.2038028