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Urethane 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

Conference Call Participants

Frank Mitsch – Fermium Research

Angel Castillo – Morgan Stanley

Bob Koort – Goldman Sachs

Hassan Ahmed – Alembic Global

Mike Leithead – Barclays

David Begleiter – Deutsche Bank

John Roberts – UBS

Mike Sison – Wells Fargo

Eric Petrie – Citi

Arun Viswanathan – RBC

Alex Yefremov – KeyBanc

Matthew Blair – Tudor, Pickering, Holt

Laurence Alexander – Jefferies

Mike Harrison – Seaport Research

Peter Huntsman

Thank you, Ivan. Good morning everybody and thank you for taking the time to join us this morning. Let’s start out on slide number three. Adjusted EBITDA for our Polyurethanes division in the second quarter was $208 million versus $31 million a year ago.

Our Polyurethanes division continued to improve posting 13% year-on-year volume growth and 18% adjusted EBITDA margins. Our differentiated volume which includes our spray insulation, automotive, and elastomers businesses grew by 22%.

As a reminder, during the second quarter, we conducted a major turnaround at our MDI facility in Rotterdam, the Netherlands. This turnaround occurs once every four years with many third-party supply facilities carrying out turnarounds at the same time.

Downtime associated with the turnaround negatively impacted volumes and adjusted EBITDA by approximately $35 million in the quarter. This was $10 million more than we communicated to you last quarter as several third-party issues delayed our start-up and forced the plant to run at lower rates for an extended period in May and June. The good news is that this turnaround is behind us and operations at Rotterdam have returned to normal.

Excluding the impact of the Rotterdam turnaround, our total volumes would have grown at 22% year-on-year as we were essentially sold out on our MDI units worldwide.

We continue to see a strong recovery in our Americas and Asian regions with MDI volumes growing 15% and 13% respectively versus the first quarter. Significantly higher margins also drove year-over-year adjusted EBITDA growth in the quarter.

Higher average selling prices offset higher raw material costs and unplanned outages. We believe that longer term supply and demand fundamentals in the MDI industry will remain balanced and margins will remain at a fairly healthy level for the foreseeable future.

Growth in our core construction markets, including insulation adhesives and coatings, continue to lead the recovery in urethanes. All these sectors saw growth on a quarter-over-quarter basis even in Europe, where we had both planned and unplanned disruptions associated with the Rotterdam turnaround.

North American insulation businesses, including spray foam and our composite wood products business, remains solid, as we see residential construction spending remaining robust, and commercial construction spending picking up. Our order book for spray foam has never been stronger, and we’re implementing price increases to help offset higher raw material pricing and logistical costs.

Elastomers, which included our global footwear business is another core growth platform for polyurethanes, and it continues to see strong recovery trends globally. Demand in both residential — excuse me, demand in both industrial and consumer markets within elastomers remained strong.

Results would have been even better, this past quarter, had it not been for shortages and some key raw materials and higher logistical costs. We expect our business to keep up the momentum for the remainder of 2021.

Our global automotive business significantly increased year-over-year due to favorable comparisons. However, volumes were down mid-single-digits compared to the first quarter due to the ongoing chip shortages, which have resulted in lower production rates industry-wide.

Having said that, global demand in our markets is strong, and we were able to redirect volumes originally intended for the automotive market into markets utilizing similar chemistries.

Our Polyurethanes strategy is to upgrade the quality of our portfolio. We will continue to redirect more of our plant’s output to our differentiated businesses in bottom slice lower-margin component business.

We will invest in our downstream businesses organically and where it makes sense through bolt-on acquisitions. Where we can generate higher and more stable margins through long-term contracts in our components business, we are doing so.

Our splitter investment in Geismar, Louisiana, is consistent with this strategy. Once completed, the new splitter will allow us to produce more higher-value MDI molecules while maintaining the same total plant output. This investment is progressing very well.

We’re seeing strong demand for materials that are the output of this project and we’re moving aggressively to complete this project as soon as possible to take advantage of these conditions. We now expect to complete construction at the end of the first quarter 2022, earlier than originally planned.

Once fully operational, we expect this project to contribute $30 million in incremental adjusted EBITDA on an annual basis and expect to see stronger margins next year, as a result of our earlier than planned completion.

Our PO/MTBE joint venture with Sinopec in China, where we own a 49% interest, continues to benefit from very strong margins and is driving above-average equity earnings. We do see our equity earnings associated with this joint venture being lower in the second half of the year when compared to the first half of 2021.

Overall, we remain very positive about the trends that we are seeing in polyurethanes globally. Demand is solid and the industry is toggling between balanced and tight at this point in time.

Substitution will continue to help drive MDI growth and our sustainable solutions products, which deliver increased energy agency, are expected to follow trends that will have a very positive impact on MDI demand for the foreseeable future.

Looking into the third quarter, we see general demand fundamentals remaining solid or better, and lower turnaround costs are already impacting the bottom line of the business in a positive manner. Even with typical seasonality and lower joint venture earnings equity earnings, we would expect our Polyurethanes third quarter adjusted EBITDA to be between $240 million and $260 million.

Phil Lister

Thank you, Peter. Turning to slide 7. We were pleased to see the continuation of a strong recovery across the portfolio. Adjusted EBITDA increased by $280 million year-over-year and by $45 million or 16% quarter-over-quarter. The improvement in EBITDA from the prior quarter is in spite of an approximate $35 million impact from the extended turnaround at our Rotterdam MDI facility.

In particular, we were pleased with the performance of both the Advanced Materials and the Performance Products divisions both of which achieved strong adjusted EBITDA margins in the quarter and where we are investing inorganically and organically to grow these two divisions. The increase in volumes year-on-year is primarily attributed to strong growth since the depth of the global pandemic across the majority of our portfolio and businesses.

Variable margins significantly improved leading to adjusted EBITDA margins moving into the high teens at 17%. Sales price increases exceeded some rapid increases in raw materials, which have occurred since the beginning of the year.

Turning to slide 8. We continue to make good progress with the integration of our recent acquisitions. A reminder that our Huntsman Building Solutions target synergies have been exceeded and our Advanced Materials acquisitions of Gabriel and CVC remain on track to deliver $23 million of synergies.

In addition, our cost optimization plans also remain on track with our program and Performance Products fully completed. In total, we expect to achieve full year acquisition synergies and cost optimization of approximately $90 million in 2021 with a target of approximately $110 million in 2022.

Turning to slide 9. We had a use of free cash flow from continuing operations of $83 million in the second quarter, as a result of the extended turnaround at our Rotterdam MDI facility. The Rotterdam MDI turnaround is now behind us for another four years and we anticipate significant free cash flow generation in the second half of the year. Consistent with remarks made on our last earnings call, we anticipate a free cash flow conversion rate to adjusted EBITDA of approximately 25% for the full year.

As Peter indicated, our MDI splitter project is now scheduled to come online earlier than previously anticipated. As a result due to the acceleration of this project, capital expenditures for 2021 will now be $355 million to $360 million, approximately $25 million to $30 million higher than previously indicated. This acceleration of spend in 2021 along with increased adjusted EBITDA from the earlier start-up of the splitter will contribute to a targeted free cash flow conversion of approximately 40% in 2022. Should present demand trends continue, we see no reason why we should not be targeting and meeting or exceeding a 40% free cash flow conversion after this year.

During the second quarter, we received a $28 million earnout related to the sale of our India DIY business, bringing gross proceeds to $285 million and a multiple of approximately 15 times 2019 adjusted EBITDA on the sale of the business. Our balance sheet remains strong with $1.9 billion of liquidity and a net debt to adjusted EBITDA leverage of one-time at the end of quarter two.

During the quarter, we completed an offering of $400 million in 2.95% senior notes due in 2031 and used the net proceeds and cash on hand to redeem in full $400 million a 5.125% senior notes due in 2022. Combined these transactions will save approximately $9 million in annual cash interest.

Finally, addressing capital allocation. Following the divestment of approximately one-fifith of Huntsman’s portfolio to Indorama in early 2020, we have focused on building our core platforms through targeted bolt-on acquisitions. Where it makes sense from a valuation perspective, this M&A strategy will continue, as we intend to grow our core platforms, particularly in our specialty and downstream businesses. As a reminder, we increased our dividend by approximately 15% earlier this year and we currently have an approximate 3% dividend yield on our equity. In addition, we have an existing share repurchase plan authorized by our Board of up to $1 billion of which we have bought back $580 million prior to the global pandemic. We have placed share buybacks on hold during the pandemic. Taking account of market conditions and an appropriate return on capital we anticipate resuming some level of share repurchases in the second half of the year.

Peter Huntsman

Thank you, Phil. I think the results of this past quarter marked a significant milestone and our recovery from the recent calamitous results of the past five quarters due to a global pandemic. The last time we had a quarter of this level of EBITDA was in 2017, 2018 during a time when our Polyurethane business was enjoying unusually strong market conditions. At that time, MDI made up as much as 74% of our EBITDA. I think it is worth pausing and asking what is different today and what more is there yet to come. This past quarter, Polyurethanes made up 54% of our adjusted EBITDA as we see the result of a stronger performance products and recovery in Advanced Materials and the Textile Effects business that is likewise seeing a return to normality. I hardly see the second quarter as being peak results.

As I look at the coming quarters, we will see the effects of the completion of our Geismar, Louisiana MDI splitter that will start generating EBITDA in the second quarter of next year. We’ll also see the benefits of an additional $20 million of cost savings as we streamline our Polyurethanes business. Our Polyurethanes spray foam business has been constrained due to raw material supply issues that will be solved in the second half of this year. MDI remains well balanced. However, during the second half of this year just over 10% of the global capacity of MDI will be lost due to announced closures for needed maintenance work. This will be taking place at a time when our facilities ought to be operating at design rates and sold out.

Frank Mitsch

Good morning. And congrats Phil on being named CFO. Peter working through the numbers, it looks like you’re expecting third quarter to be better than the second quarter in terms of EBITDA and that typically is not the case with Huntsman. I think you have to go back several years when you find something like that. So, given that you’re not anticipating to see kind of that typical seasonality or there’s other factors at work in terms of inventories etcetera what does your early read on fourth quarter suggest? That is typically you see even greater seasonality in the fourth quarter? Is this an anomalous year. How should we be thinking about the seasonality impact on Huntsman?

Peter Huntsman

Well, I think that as we look into the third quarter, we will see a little bit of seasonality for the third quarter. We’re also going to see the reversal of the T&I or the downtime that we saw in Rotterdam. And when we back that out as well as some of the cost reductions that continue to flow through and the pricing initiatives that we have, I think that we’re going to see — you’re right a stronger third quarter certainly in our second quarter.

And we’ll see our corporate expenses at that time in the third quarter and probably about the same in the fourth quarter about $50 million a quarter. I’ll remind you that there is some LIFO charges in that number. And also, we’re seeing recovery in our business travel and expenses and so forth just associated with running the business. So we look at that third quarter we feel very confident about it.

Again at this time barring a major pandemic closure of the economy or anything, I would think that our fourth quarter is going to continue to be strong. And I think our second half of the year again from, where I sit right now should be a stronger half than the first half of the year. And again that’s looking at the present demand trends and so forth. Still very early in the third quarter but I’ve got quite a bit of confidence. I did mention that we’re looking at about a 10% losing about 10% of the capacity in the third quarter.

That will also be about 10% of the industry capacity for MDI in the fourth quarter as well, as we see a number of plants that are coming down for maintenance and some of those have been postponed since earlier in the year to the second half of this year. And I don’t see a lot of movement from that scheduling or further delays if you will. So, I think in the second half of this year we’re going to see some pretty good demand and probably some constrained capacity.

Angel Castillo

Hi. Thanks for taking my question. Congrats on the strong quarter. And Phil, welcome as well. Just a quick question on MDI. I’m curious, you talked about the differentiated volumes being stronger in the quarter than kind of the overall segment. And just as you look at those end markets and kind of the mix between kind of the more commodity versus the differentiated volumes curious, if you could give us more color. What are you seeing beyond those volumes kind of going forward? And what does that mean for your margins as well in terms of — we all track MDI spreads but in terms of the mix that that could benefit?

Peter Huntsman

Well, I’m going to have Tony Hankins, who’s our Divisional President perhaps comment on some of the macro trends that we’re seeing regionally. But as we look at it globally again, we’re looking at an environment, where we’re trying to take as much as our more commoditized tonnage and moving that into further downstream.

Again, I just want to remind the market that there will be some times when people might be scratching their heads saying “Why aren’t we benefiting as much during some of the cyclical upside that you see on some of the more commoditized grades in some of these times of outages and so forth?” But I think we’re trying to look at an MDI business that delivers more reliable margins as a better consistent cash flow and isn’t so dependent on spot pricing. So Tony, any comments that you have about some of the regional impacts we’re seeing?

Tony Hankins

Yes. Thank you. We’re seeing very strong demand right now in two of our three core downstream franchises the Huntsman Building Solutions, which is spray foam. And our elastomers business particularly, the footwear business and the industrial assets business, where we’re seeing very strong double-digit growth there right through the second half of the year. But we sold out. We’ve got an eight-week order backlog in HBS.

The good news in that business is commercial construction is starting to pick up and we’re seeing spray foam moving into that much more stronger than the past, in addition to the residential construction area which has been very strong as you know with the new home build. So we’re very, very pleased about that.

Automotive has been off about 10% this quarter because of the chip shortage. I think that’s going to ease up a bit towards the end of the year. That’s clearly constraining automotive. But we move those products into our — into other chemistries as Peter, said on the call. Those are the chemistries that things like flexible foam into memory foam mattresses and pillows, where we’ve seen 35% quarter-on-quarter growth in those areas. So we’re very, very optimistic and very upbeat about growth going forward in the second half in our downstream differentiated businesses and we’re moving molecules from our component side of the business into those downstream markets. That’s the whole strategy of valuing moving from components to specialty where the margins are higher, where the earnings are sustainable and where we’re seeing real benefit particularly from the infrastructure build and the climate change investments, which are going to be made in not just the coming quarters but the coming years. So I’m very, very upbeat about these downstream businesses that we serve.

Hassan Ahmed

Good morning. Peter, I just wanted to focus on the Q3 guidance you’ve given, specifically for the Polyurethanes business. I mean if I adjust for lost earnings from the Rotterdam turnaround, it seems that you guys are guiding to flat to slightly up EBITDA Q2 to Q3. And then if I sort of triangulate that with some of the comments that I heard, it seems that probably volumes are going to be up and this is all obviously adjusted for the Rotterdam turnaround. It seems volumes will be up in Q3 sequentially. You guys have pricing initiatives in place.

So what am I missing here? From the sounds of it, it seems Q2 to Q3 Polyurethane segment EBITDA should be up nicely. So are you guys being relatively conservative with that guidance?

Peter Huntsman

Well, I would never accuse Mr. Hankins here of sandbagging numbers Hassan. But I would put a couple of things in mind.

On the positive side, well, let me start with the need on the two areas of concern that I have looking into the third quarter, one of those is going to be the lower number in that polyurethane numbers. We have our joint venture from our PO/MTBE joint venture the equity earnings coming out of that in China.

In the second quarter, I think that we had better — quite a bit, better-than-average-earnings in the second quarter coming from that. And I see that cooling in the third quarter that — of which is selling propylene oxide and MTBE. As those markets come into better balance, I think that those earnings probably will be slowing a bit in the third quarter.

In the third quarter also we’re going to be seeing the effects of higher raw materials particularly benzene. Now we’re seeing benzene coming off of a recent $4 to $5 high this past quarter and dropping down to the $3 and change area, but remember that, our time of buying the benzene, transporting the benzene, converting it to nitrobenzene, aniline crude MDI working it through our system, typically is about a quarter impact.

And so what we saw in raw material increases in the second quarter will be hitting us in the third. So on the negative side I’d say, again, some pressures on the earnings on the PO/MTBE side and also having to deal with higher raw material costs in benzene that we know will be coming working its way through the system.

On the positive side yes the T&I is behind us. We have greater volumes and we are going to be pushing for price increases some of — and that will be price increases across the board. And it will be price increases that we’re presently working with, as I made mention in my comments with those contracts that we — those longer-term contracts where we have particularly in the Americas where we have long-term agreements kind of pass-through sort of agreements. Many of those are coming due at this time.

And as Tony articulated, our objective in the Americas is to take our polymer our commodity businesses and move those further downstream. We’re going to do that in two ways. We’re going to do that by putting it to the splitter and moving those into new markets those molecules that today are being sold at commodity pricing.

And those are the same pounds that also get moved into the spray foam business. So we see it growing at double-digit rates. So our percentage of polymeric commodity-based MDI particularly in North America is going to be — is going to continue to be a shrinking market for us.

And we have an opportunity to — with the remaining customer base that we have to evaluate those customers the service that we’re giving, the value that we’re creating for them and look at that pricing as well.

So sorry long-winded answer here, but as we look into the third quarter, and I think many of those things that we’ll be implementing in the third quarter will spill over into the fourth quarter, even though we’ll see seasonality in the fourth quarter, I think many of the positive attributes will spill in the fourth quarter which gives me, as I mentioned earlier, a lot of optimism not just the second half of this year but going into 2022.

Mike Leithead

Great. Thanks. Good morning. Question just on the raw material front. I think outside of benzene, the company is a fairly decent sized buyer of chlorine and Epi. And if you look at those products, there’s been not only a fair amount of supply disruptions lately but the largest US producer of both products has been pretty vocal that price is only going to go upward moving forward. So just curious, how you think about your security of supply there and your ability to get pricing to offset that.

Peter Huntsman

Well, look, it is a time when as we see the recovery of the global economy, the demand that’s being pulled on the global economy that we are going to see raw material pressure probably across the board. I will just note though that, as we are looking into the third quarter into the fourth quarter, we are starting to see prices diminish on the raw material front.

Benzene seemingly has peaked in the second quarter going into the third quarter. And typically going into the winter months the gasoline slate, a lot of what refineries produce will also – you’ll start seeing a diminishment in some of those values as well.

On our epichlorohydrin and chlorine so far I’m not going to comment on particular buying strategies and so forth. But in the area, particularly of epichlorohydrin, there have been some disruptions in – from the supply, particularly from Asia. Those things will be worked through.

Look we’ve been buyers or producers of epichlorohydrin for many years. And this is a global commodity. It’s going to move with supply and demand. And that’s just the way it is. I think in many commodities in this industry, you sometimes get in those positions where you think prices are always going to stay high and prices will never diminish and economic reality will hit you, particularly in commodities when you’ve got global competition.

So, I think longer term in spite of people trying to lock in long-term prices quote forever, the institutes of the markets will continue to be the same. I don’t see any fundamental change in that. When you look — and also and you look in China, our large MDI plant. We have HCL recycling there meaning that we recycle our chlorine. We’re looking at the possibility in the economic models of doing that more widespread throughout the company.

And I think as you start looking at technologies, more and more our technologies, not only will be for — from an environmental point of view but how do we reduce — how do we recycle and how do we capitalize on technologies that allow us to have better reliability, less materials coming into our facilities and utilize technology to basically make more with less. And I think that that’s a trend that we’re going to continue to see across the board.

David Begleiter

Thank you. Peter, just on polyurethane, you mentioned that 54% of EBITDA today is from that segment. Can you talk about how much of that is now downstream differentiated EBITDA versus commodity EBITDA, and how’s it compared to a number of years ago?

Peter Huntsman

Well, I think as we look at that commodity versus downstream, I mean I think it’s a little bit — I’m a bit hesitant to give an exact number on that, because not everything fits exactly in those two buckets. But I would look at Tony Hankins here and say, we’re probably looking at somewhere between two-thirds to — probably closer to three-quarters of our EBITDA is being earned by our differentiated products. Tony, you see that?

Tony Hankins

No, that’s absolutely right, Peter. I think we’re very differentiated in Europe. The figure in Europe is higher than that. I think in America, it’s — the Americas is 70% 75%. The Patriot splitter investment is really going to help us move that even further downstream. And in China, it’s up 50-50, and that’s the area we’ve got to be more working to really start converting more of that component where we see the spike from the fly-ups into more downstream stable lenses. So, yeah, overall, Peter, about 70%, 75%.

John Roberts

And then you talked about some constraints in PU foam volume there. Is it your propylene oxide supply from Indorama, or was it blowing agents or some other additive that might be constraining the PU foams?

Peter Huntsman

Tony, do you want to comment on that?

Tony Hankins

Yes. John, I think it’s a wide range of raw materials. I mean polyols have been constrained, particularly in North America this past quarter, but also catalyst blowing agents, release agents. I mean right across the board, I think raw materials have been very tight, and so things like butane dial, which go into the CPU business.

We’re hopeful that’s going to get a lot better in the second half. But, yes, it’s been — particularly in our Huntsman Building Solutions business has been very restrictive of our ability to really capitalize on the strong growth. So we’re working hard to alleviate that with alternative products and remixing of chemistry.

Mike Sison

Hey, guys. Nice quarter. Peter, the MDI prices in China were pretty volatile in 2Q. And I know the U.S. and Europe was a little bit more stable, but you were able to hit your outlook for Polyurethanes.

And given the volatility, why do you think that was the case? Have you done enough in that portfolio to be able to manage the volatility in component pricing? And then, any thoughts on any new industry capacity coming on in 2022? Just if you have any insight there. Thanks.

Peter Huntsman

Yes. And very quickly and if I’m rather quick in my answers over the next couple, we’ve still got quite a few questions. I know, there’s other companies that have their announced earnings, they’ll start in about 10 minutes. So if I give rather quick answers, my apologies. We kind of — I’d like to try to get as many questions as possible.

On the Chinese polymer MDI, it remains volatile. I wish we had a crystal ball that could see into the quarter and see where that price is. But I would remind you that pMDI is only 5% of all of Huntsman’s portfolio and it’s only 10% of Polyurethanes.

So if we’re getting it right, I think, it’s more that we’re getting the other 90% right. And maybe that other 10%, I’d like to think we’re getting it right, but we try to be as transparent with the market. As soon as we see something, we try to pass that on to the market.

On capacity, it’s coming on. Look, I don’t — outside of China, in some announcements that have been made, I don’t see any greenfield. And when I say greenfield, I mean a brand-new MDI site anywhere in the world. I mean you’re looking at four to five years to be able to build such a site. There isn’t any even in the planning and permitting stages at this point.

Again, there are some expansions taking place on existing facilities and so forth, but I don’t see any significant capacity coming on in MDI for the foreseeable future. When I say foreseeable future, I mean over the course of the next several years. Next question, please.

Arun Viswanathan

Great. Thanks for taking my question. I just wanted to get your thoughts on reliability. Obviously, we’ve had some force majeures here and production discipline – disruptions at some of your competitor facilities. I guess, do you view that positively? And I guess, any comment on your own system? Obviously, there’s maintenance going on but do you expect kind of continued disruptions in the industry going forward? Thanks.

Peter Huntsman

I would never wish disruption on any of our competitors. But – and now having said that, I think that, when you look at the configuration in this industry of the size of some of these lines that have been built 400,000 tons sort of lines. It used to be when a line went down you were losing 50,000 or 100,000 tons of material, when lines in MDI line to go down you need a very, very small amount of contaminants to get into that system to put a line down.

And when you see a single line now of 300,000, 400,000, 500,000 metric tons and a line of that magnitude comes down for maintenance or cleaning, you are going to see it impact literally the global balance. So I think that’s a factor. And the other factor that, I would say is that, as you look at most of these MDI plants, I think our competitors, I think are very, very well built. They’re very well – they’re very well maintained. But they’re also dependent on infrastructure that in many cases around the world is strained. It’s older.

I look at a lot of the chemical infrastructure here in North America. Much of it, you get these brand-new billion-dollar facilities, and they’re being operated with an infrastructure that’s 30 or 40 years old. And so it’s not just the facilities themselves, but a lot of it is when you see a storm come through, freeze come through something of that nature. You’re looking a lot at third-party issues. And look at the outage that we suffered in the second quarter due to the Netherlands was a product pipeline that suffered corrosion that supplied a supplier to a supplier to us.

And so I mean, you’re kind of like three times removed of an older pipeline that had some corrosion unexpected corrosion in it. So I think as you look at more of an interchangeable and an interconnected industry, I think if anything, I’m not sure that, really gets better. I think, we’re just going to have to – maintenance is going to have to be – is going to continue to be paramount.

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.