Huntsman Corporation (HUN) Q2 2025 Earnings Conference Call Transcript

Aug. 01, 2025 1:41 PM ETHuntsman Corporation (HUN) StockHUN

Q2: 2025-07-31 Earnings Summary

EPS of -$0.20 misses by $0.08

 | Revenue of $1.46B (-7.37% Y/Y) misses by $36.74M

Huntsman Corporation (NYSE:HUN) Q2 2025 Earnings Call August 1, 2025 10:00 AM ET

Company Participants

Ivan Mathew Marcuse – Vice President of Investor Relations & Corporate Development
Peter R. Huntsman – Chairman, President & CEO
Philip M. Lister – Executive VP & CFO

Peter R. Huntsman

Ivan, thank you very much, and thank you all for joining us. Our second quarter results were not unexpected and came in about where we thought they would. We did see a nice rebound back to what we would see as more normalized earnings from Advanced Materials, offsetting the disappointing sluggishness of construction activity and tariff uncertainty, especially in polyurethanes.

As we step back and look at the macro condition, it appears that the volatility caused by tariff and trade disputes over the past few months is starting to dissipate at least as of 12 hours ago. I believe that inventories remain very low in most of our downstream supply chain, while consumer confidence seems to be muted. We look into the third quarter, we see neither reason to panic nor to be overly optimistic. However, long term, we do anticipate an improvement in construction and perhaps some gradual change as China seems to be focusing more on their overcapacity.

Our focus will continue to be on our balance sheet. To this end, we will continue to be extremely prudent on spending capital beyond our normalized run rate of safety, maintenance and reliability. We remain focused on our cost structure and making sure that our business expenses are in line with market conditions and our cash generation. Our aggressive inventory and working capital focus allowed us to generate positive cash flow in the second quarter. This cost us about $25 million of EBITDA in the second quarter. This charge was offset by reduced bonus accruals and other smaller onetime benefits. This inventory impact will be less in the third quarter, again, offset by bonus accruals.

As markets improve or raw materials drop in value, we want to make sure that we’re in a position to take advantage as soon as possible. We will operate our business to create value over volume to the extent that we can. We continue to review our asset portfolio and engage with shareholders. The last thing we want to be doing is sitting around waiting for things to get better. Over the next few quarters, we will see usual seasonality, but also the possible influences of higher tariffs and duties for MDI coming into North American markets, a possible interest rate cut, the benefits of more of our cost reductions falling to the bottom line and hopefully, a greater focus on prices over volume. In short, we will manage our balance sheet as effectively as possible while also pushing for better P&L outcomes. With that, operator, why don’t we open the line up for any questions.

Kevin William McCarthy

Peter, would you comment on MDI utilization rates in the second quarter and how you see those progressing into the third quarter for the industry as well as Huntsman?

Peter R. Huntsman

Yes. Much of that, Kevin, a very good question, something that we struggle with because there’s not a great deal of information as to how people are running their plant and what capacity they’re running their plant. Obviously, with the tariff situation and so forth with product that was coming into North America from China, that product is either being scaled back in capacity or going into other markets. We’re not seeing a lot of that product, for instance, showing up in Europe, which is something that some of us feared a couple of months ago would be the case.

So it really is quite a fluid question. I would say that, by and large, the industry is operating somewhere in the low to mid-80 percentile. That’s going to probably be a little bit higher than that in North America, perhaps a little bit lower than that in China. But that’s — I believe that’s about where we are today.

Patrick David Cunningham

Can you give us an update on how your order books have progressed in July? I think we’re hearing some mixed signals on sort of if things are stable or things are getting worse in July? And what are some of the conversations you’re having from larger customers in auto and building and construction given the recent tariff implementation?

Peter R. Huntsman

I think that stable would probably be the best singular description of what we’re seeing across the board. I mean there are some pockets here and there. Just anecdotally, I think that there are a number of truckload orders, rail, which would tell you that people are ordering just in time, which should tell you that inventories are probably lower than usual.

In my personal opinion, I believe that the supply chains are pretty thin right now, people in times of uncertainty, especially where the overall energy market, the energy structure is down from where it was 6 months ago. People are probably not going to be holding a lot of inventory on the expectation that the energy costs will be coming down, chemical costs and so forth.

So I think that it’s very thin right now and people are kind of ordering just what they need for the next 30 days or so. But right now, I’m not seeing a pickup that would give me a great deal of optimism. Conversely, I’m not seeing a big drop-off in any one area that would give me pessimism.

Patrick David Cunningham

Great. Very helpful. And Peter, you seem to be optimistic on potential China supply rationalization, but it seems there’s still pretty healthy capacity build expectations in MDI. So where do you see this potentially having the most significant impact in terms of the key chains or what it might mean for Huntsman’s earnings levels going forward?

Peter R. Huntsman

Well, I would say that as we think about Chinese capacity and so forth, China, where you have the greatest concentration of production continues to be our most profitable market for MDI, and our business in China is performing quite well in comparison to North America and a very well in comparison to Europe. So I think that there’s a combination probably of volume discipline, pricing discipline and what have you. And we’re also seeing some greater trade movements and so forth.

At the time — as we look at the first 6 months of this year, we’ve seen Chinese imports into North America of MDI virtually stop. For some reason, we’ve seen imports coming in from Europe of all places increase. Now that’s not offsetting each other one for one, obviously. But — so there are some rather unusual trade patterns. But by and large, I don’t think there’s anything terribly surprising taking place right now.

Jeffrey John Zekauskas

I think earlier in the call, you said that utilization rates in polyurethanes were in the low to mid-80s. Is that where your utilization rates are?

Peter R. Huntsman

Yes. I’m not sure that we’re too dissimilar from — they’d probably be — we run our plant in China at pretty high rates because we’ve got good market demand there. The automotive sector in China continues to perform quite well and everything else is pretty stable. I wouldn’t say that it’s growing through the roof. Europe obviously continues to struggle. In North America, we’re probably running in the mid-80s, give or take a few percentage points. So I’m not sure that we’re terribly different than most of our peers.

Jeffrey John Zekauskas

What are your utilization rates in Europe?

Peter R. Huntsman

Those would probably be around 80%.

John Ezekiel E. Roberts

Peter, the prepared remarks mentioned Advanced Materials is the primary focus for bolt-on acquisitions. I don’t expect that you’d be making any bolt-on acquisitions near term, but are you no longer interested in Huntsman Building Services or Huntsman Building Systems, HBS as an area long term?

Peter R. Huntsman

Well, I think I learned from my father a long time ago, you never say never in the area of M&A. But at the same time, you do have to have a strategy. You can’t just look and buy anything that is available. I think that as we look at where we want to be moving as a company, we want to be able to take advantage of adhesives. We want to be taking advantage of aerospace, lightweighting, energy conservation.

And as we look at our most stable lens of our business, as we go down, we look at electronics, we look at elastomers, as we look at our adhesives, lightweighting, carbon fiber, composite materials and so those are all areas, I think, for us that we’ve been able to build a nice platform, and we’d like to continue to do that.

Now you look at something like polyurethanes, and of course, within our polyurethane business, we have elastomers. We have some of those applications. So that are further downstream. Those businesses are the best performing parts of our polyurethane business today. So I don’t want to sit here and say that we’d never do anything in polyurethanes. But if we do, it would probably be something that would complement that end of the business more so than the more volatile in commodity side of things.

David L. Begleiter

Peter, do you expect the tariffs you now have on Chinese MDI to lead to, at some point, a new U.S. MDI plant not by you, but maybe a competitor?

Peter R. Huntsman

Well, I can only give you — okay, I will tell you, it will not lead to a new plant by Huntsman. I can — at least not while I have anything to do with managing the company. But what competition decides to do, I have no idea. I personally believe that there’s more than enough MDI in the world today, and we’ll be just fine. But I — if you put barriers up around the U.S. on imports, let’s remember that the U.S. also exports its MDI into markets, for instance, into Latin America and into Canada and so forth.

You’ve got — you’ve also got to realize that if you’re putting imported materials are going into Latin America and Canada and so forth. There’s less export from the U.S. I think that a lot of people can make a mistake by just drawing a circle around the United States and somehow thinking that that’s going to be this fortress of what’s in the United States stays within the United States and nothing can penetrate it from Europe or any place else. Like I said, trade is a messy subject. And I don’t — I think presently, the world’s got plenty of MBI capacity doesn’t need anymore.

Salvator Tiano

Perfect. And if I may ask about the future of your European footprint, not on a little bit more downstream polyurethanes, but on the core MDI Rotterdam facility. I mean, there’s a bunch of PO shutdowns, a number of them more likely to come as well. So at what point do you think that European demand may permanently be impaired for MDI and there may not be enough demand for your own facilities there?

Peter R. Huntsman

I think that we have either the lowest or among the lowest production sites in Europe. And I believe that, that site is going to be competitive relative to other European producers for some years to come. I would be — if we get to a point where we can’t justify the operations of our European facility, I think that there’ll probably be other facilities that will come to that conclusion before we do. However, we do continue to look at all of our operating costs there. We look at our operating viability. And — but I see longer term, as I see today, that’s a very limited vision. But as I see today, that’s a site that we’re going to continue to operate. And it’s a segment of the market in polyurethanes that we’re going to continue to feed.

Michael Joseph Sison

Peter, when you think about China, they talked about involution. Is there a good amount of capacity there that could or maybe should be looked at and maybe taken out that could help the supply-demand situation we’re in now?

Peter R. Huntsman

Very good question. I think China is — I’ve heard more in the last 30 days and having been in the last couple of 2, 3 weeks ago, more discussion in country, certainly than I hear out of country about the government looking at overcapacity, looking at older facilities. As I look at the MDI situation in China, most — every facility in MDI in China is — it’s not only very good technology, but it’s also some of the largest scale — largest, best integrated facilities that are integrated all the way up to energy production, aniline production, coal production, all the way down through the line.

So I think that there will be a number of closures that will take place in the chemical industry over the next year, 2 or 3. I do not believe that, that will be the case for MDI, particularly if you compare the competitiveness of those facilities with 30-, 40-, 50-year- old facilities that are operating in Europe that are subscale and having to struggle with much higher raw material costs and supply chain costs and so forth.

Philip M. Lister

Mike, one area we are looking at is our joint venture in China on PO/MTBE has been significantly under pressure. It could be that over the coming years, there could be some of the older MTBE producing facilities that come out, but that will be over a number of years.

Hassan Ijaz Ahmed

Peter and Phil. Just wanted to stick to the theme of a recovery, however far it is. In your prepared remarks, on the polyurethane side of things, you mentioned that sequentially, volumes were up around 3%. And typically, Q1 to Q2, you see an 8% to 10% sort of uptick in volumes. So I’m just trying to get a sense of how far below normal volume levels are we just to get a better sense of as and when that recovery happens, how much higher these volumes can actually go?

Peter R. Huntsman

Yes. I think that for the most part, when we look — when we take out kind of onetime contracts and business that we won in the second quarter, you’re probably looking at somewhere between 5% and 8% that I would say is kind of missing in the numbers. And that typically is around housing and construction. We saw an incredibly anemic housing and construction market this year. I don’t think we’ve seen anything like this since COVID and since The Great Recession before that.

So there’s — I think there’s a great deal of uncertainty around people wanting to commit to what is usually the largest purchase in their lifetime during times of market volatility and uncertainty and also with higher interest rates. So I’m very hopeful that those markets will recover early this next year, and we’ll be in a much stronger position this next year. But we definitely — the single biggest impact in the second quarter that was — that I think — I’m not going to say surprised us because we were talking about this on our last call, but was the other lack of seasonality that we typically see at this time around construction.

Hassan Ijaz Ahmed

Understood. Very helpful. And as a follow-up, I mean, again, in the prepared remarks for polyurethanes, you guys talked about how through the course of the quarter, you saw a more intense competitive environment in Europe. And I guess you mentioned driven by domestic producers. So can you just expand on that? And do you see any sort of resolution around that in the near term as well?

Peter R. Huntsman

Unfortunately, I don’t see a great deal of resolution around that. We push very aggressively in the second quarter as we did in the first quarter, as we did in the quarter previous to that, for better, higher pricing margin expansion in Europe. And the — I believe that I can’t — again, I don’t know what the decision of our competitors are, but it seems like people are putting volume over value and they’re moving volume at any price sort of a thing. So surprisingly, in Europe, that is today our highest cost urethane production in the world and our lowest value of MDI in the world. So you kind of got — both sides are hitting you.

Philip M. Lister

So what do we do, Hassan? We continue to focus on the announcements we made, getting our cost base correct and all of the activities that we’re doing, including closing some of our facilities there and then work within the competitive environment that’s existing.

Peter R. Huntsman

Yes, 85%, 90% of our cost reductions right now across the company are focused in this market.

Aleksey V. Yefremov

Peter, I was hoping you could deconstruct for us Polyurethanes segment price declines of 5% year-over-year this quarter. I mean you just talked about Europe, but was this the sole reason for this decline? Were other regions particularly bad or good? And also from the perspective of just polymeric MDI versus systems, were these thesis better or worse than the 5%?

Peter R. Huntsman

Yes. I think that we did see a price fall from the first going into the second quarter. We started off the second quarter, the beginning of the second quarter, particularly in China, where we’ve gone from about RMB 18,000, RMB 18,500 down to about RMB 15,000. So was that 20% — 15%, 20% drop in price from the end of the first quarter going into the beginning of the second quarter. We came out of that quarter with stabilization, a bit of an increase through the quarter and stabilization as we look into the third quarter. I think that we’re hoping that we’ll see some price increases in China with that stabilization getting better. In the U.S. and Europe, we’re just seeing some very competitive pricing dynamics in place. A lot of people chasing little volume.

Philip M. Lister

Aleksey, if you were looking at the 5% year-on-year, which I think you are in our press release on polyurethanes, you go back to this time last year, it was about RMB 18,000 for polymeric. And today, we’re at about that sort of RMB 15,000, RMB 16,000. So you’ve seen a drop of 10% to 15%. So it’s mostly in the polymeric area. You would have had some pressure on system prices, some on MDI variance. But in general, the move that you’ve seen is polymeric MDI related.

Aleksey V. Yefremov

And here, in the past, said that it’s hard to move U.S. MDI demand offshore or at least it could be tariff-related repercussions. Can you update us on this view? Have you seen any demand maybe move to Mexico, Canada or it’s been pretty steady?

Philip M. Lister

Yes. So Aleksey, I think you’re asking about the trade flows there and whether some product instead of coming into the United States moves into Mexico or into Canada. Look, I think — yes, I think we’ve said if you look through the first sort of 6 months of the year, clearly, the imports coming into the U.S. are considerably lower. There will be some which would have gone into the Canadian business, into the lumber business there. A little bit into Mexico. Mexico is not an enormous market here at all and mainly driven by automotive and furniture actually, where in general, you have to spec in.

As we said in our earlier remarks, what we’ve been watching is that whilst the imports have dropped off from China. The European imports into the U.S. have actually increased in that time. And that, coupled with a lower demand environment, those 3 elements combined have led to a pricing environment, which is relatively stable rather than, say, the increases that I think the industry had hoped for.

Arun Shankar Viswanathan

Just wanted to ask about 2 things. So first off, I understand that, obviously, Huntsman, it’s not the view that the world needs another MDI plant, especially under your leadership, Peter. But I guess others may not necessarily feel that way. Is there anything else that potentially — what’s kind of the pushing point when others kind of get to the same conclusion that you do? And maybe if you could frame that, whether it be cost per ton or pricing or anything like that?

And then similarly, on epoxies in your Advanced Materials business, there’s been some exits by others in the BLR market. Does that affect your sourcing at all? Or what can you share there?

Peter R. Huntsman

Yes. Well, I think that on the BLR side, I’ll take that first. On the BLR side, I think that we’ve got plenty of suppliers. We have seen some higher cost facilities that have cut back or slowed down. There’s plenty of BLR on the market, and I wouldn’t be — I wouldn’t assume that, that’s going to impact our earnings on our Advanced Materials at all, the few that have exited.

On MDI capacity, I just — Arun, I simply can’t imagine what takes place in a boardroom when people decide they’re going to take $1 billion, $2 billion and invest it in something that’s going to take 5, 7 years to build in a product that we’re swimming in today. I don’t know, maybe they got a crystal ball as to where we’re going to be in the decade from now, but I guess I can see the rationale that the Chinese have had over the last couple of decades as they wanted to become more independent, self-sufficient. I get that. But I look at the growth rates and so forth across Europe and North America and even China today, I just don’t see any justification for that. So I can’t speak to the rationale that would go into a decision like that.

Philip M. Lister

And Arun, I think there’s a reality none of the Western manufacturers as far as we know, have announced any new capacity, major capacity additions and major plants. There may have been some debottlenecking, but nothing from a major new plant perspective.

Arun Shankar Viswanathan

Right. But I guess I’m just curious, would they and yourselves get to a place here where that utilization rate remaining in the low 80s or high 70s is just not acceptable and would force some closures? Do you foresee that happening? And would it make sense for you guys as well? I appear not, I guess not just given your position on the cost curve, but do you foresee any supply takeout materializing that way?

Peter R. Huntsman

Yes. I would — I believe that there are some very high-cost facilities in Europe, but that’s just from information that I read publicly, I would have thought that would have happened before now, but it hasn’t. Chemical facilities, by and large, are very expensive to shut down. In Europe, it’s very problematic when you have to deal with government authorities and so forth. I was going to give into my own experience, but I won’t. We don’t have time.

But it’s — particularly in Europe, it’s expensive. And particularly in sites where you’ve got 4 or 5 other chemical companies that are dependent on your operations, you’re dependent on their operations and you may be able to or want to shut down, but you’ve got 15-, 20-year supply agreements and offtake agreements and shared site costs and so forth. So yes, a lot of these, it’s a tough and very expensive decision to just simply walk away. But I think you’re at that point where I can’t imagine they’re not companies today that are looking at those economics and decisions.

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