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Epoxy Comments from Huntsman

Huntsman Corporation (HUN) CEO Peter Huntsman on Q2 2021 Results – Earnings Call Transcript

Jul. 30, 2021 4:31 PM ETHuntsman Corporation (HUN)3 Comments

Q2: 2021-07-30 Earnings Summary

EPS of $0.86 beats by $0.05 | Revenue of $2.02B (62.31% Y/Y) beats by $162.34M

Huntsman Corporation (NYSE:HUN) Q2 2021 Earnings Conference Call July 30, 2021 10:00 AM ET

Company Participants

Ivan Marcuse – Vice President, Investor Relations

Peter Huntsman – Chairman, President & Chief Executive Officer

Phil Lister – Executive Vice President & Chief Financial Officer

Tony Hankins – President, Polyurethanes

Peter Huntsman

Let’s turn to slide number 5. Advanced Materials reported adjusted EBITDA of $58 million in the quarter, a significant improvement year-over-year driven primarily by the continuing recovery of our core industrial businesses and improving contributions from our recent acquisitions.

Excluding the acquisition of Gabriel Performance Products, sales revenue in Advanced Materials increased to 42% compared to the second quarter of 2020 generating adjusted EBITDA margins of 19%.

Aerospace results were flat in the quarter versus the prior year. Although, we saw another quarter of sequential improvement, which we expect to see again in the third quarter. We still think a full recovery to pre-pandemic levels in this segment will take another year or two given our exposure to the wide-body planes used more in international travel, but we’re encouraged that the recovery is tracking better than we had anticipated earlier this year.

Excluding aerospace sales in our other core specialty businesses experienced growth year-over-year and are now slightly above 2019 levels. Additionally, the integration of CVC Thermoset Specialties and Gabriel Performance Products continues on plan. We remain confident that we will achieve the total run rate synergies of $23 million we communicated at the time each of these respective transactions were announced.

Overall our Advanced Materials division is tracking well and our aerospace — and as aerospace recovers we expect this position to consistently generate adjusted EBITDA margins in excess of 20%.

We will continue to grow this division organically and through targeted bolt-on acquisitions. Third quarter adjusted EBITDA for Advanced Materials should look similar quarter-over-quarter subject to typical seasonality and be between $50 million and $55 million.

Our Advanced Materials division has gone through a meaningful change this past year, as we’ve purchased and integrated our recent acquisitions of CVC and Gabriel. We’ll see further cost optimization and commercial synergies in excess of $13 million by 2023 building upon the $10 million we will achieve this year. We will also see the return of our aerospace business that will further enhance our EBITDA by an additional $40 million to $50 million that is fully recovered. Our Textile Effects business will not only see the continued recovery of its retail customer base, but the completion of our Bangladeshi expansion that will deliver $10 million annually. In short, in the coming quarters the groundwork is being laid for over $150 million of additional EBITDA that will take place across our businesses. Aside from aerospace this assumes no further recovery in the market. Additionally, we have a very strong balance sheet that affords us to aggressively pursue M&A opportunities. This will be done where we have true synergies growth opportunities and the ability to stabilize our earnings.

Having said that, I am surprised at some of the multiples that have been seen in some of the recent transactions in this industry. As I have said before, we will be disciplined. The quality of our earnings will continue to be of paramount importance. This past quarter notwithstanding when we experienced a perfect storm of third-party outages unplanned inventory build and associated lost sales most of which will be recovered in the second half of this year, we are confident of our ability to deliver greater than 25% free cash flow to EBITDA this year. Should present market conditions prevail, we will see this percentage of free cash flow to EBITDA increase to 40% this next year.

Alex Yefremov

Thank you, and good morning, everyone. Peter, do you expect typical seasonality in the fourth quarter in polyurethanes and Advanced Materials, or given the trends you just discussed could we see maybe flat Q4 versus Q3?

Peter Huntsman

Yes, I do see seasonality. I mean, there will be the typical closures. Every year for some reason we have this phenomenon called Thanksgiving and Christmas, the New Year’s that seemingly slow things down. And yeah, we will see that. I do think that to offset – my only point in saying that, I’m optimistic on the fourth quarter is I think that some of that seasonality will be offset by possible – possible supply shortages, and price increases. And if those things happen then you’ll see some of that seasonality will be muted. But yeah, there will be a slowdown in demand, and that’s just something that will happen.