Urethane Highlights from Huntsman Investors’ Call

Peter R. Huntsman – President, Chief Executive Officer & Director

Thank you, Kurt. Good morning, everyone. And thank you for taking the time to join us this morning.

Let’s turn to slide number three. Adjusted EBITDA for our Polyurethanes division in the second quarter 2016 was $171 million, an improvement of $12 million compared to the prior year. More specifically, however, we saw tremendous improvement Urethanes EBITDA of $29 million compared to the prior year whereas MTBE EBITDA decreased $17 million.

Last year, our EBITDA was impacted approximately $30 million by our planned PO/MTBE maintenance outage. The split was approximately $15 million in Urethanes and $15 million in MTBE. The $30 million benefit this year was more than offset by lower MTBE margins.

We continue to see strong MDI volume growth in North America and Europe, which grew 10% and 5%, respectively. Most of the growth in North America is coming from our commercial insulation products where underlying demand is strong.

MDI continues to substitute for alternative materials we’ve partnered with successful customers. Demand in Europe is broad based, with notable strength in the automotive and elastomers markets.

Asia demand remains weak, primarily due to the economic slowdown in China. Within China, our differentiated products grew 7%, more than offset by a decline in lower margin commoditized component business.

Our strategic emphasis on growing our downstream differentiated MDI business is yielding benefits. Our differentiated MDI business represents approximately 70% of our MDI urethanes revenue.

Frank J. Mitsch – Wells Fargo Securities LLC

All right, that’s helpful. And then obviously on the polyurethane side, you have a yin and a yang; MDI doing a bit better, MTBE not so much. Can you give us your take on MDI supply demand balance for the balance of the year and into 2017?

Peter R. Huntsman – President, Chief Executive Officer & Director

Well, I think that we’re at that kind of that tipping point of being somewhere in the high – globally being somewhere in the high 80% to pushing that 90% capacity utilization. And again, that’s globally. Obviously in China and Asia, you’re going to be below that, and in the U.S., in Europe, you’re going to be right in that area. In the U.S., I think, you’re going to be a little bit tighter than that.

So I think that you’re going to have opportunities to expand further margins, and so forth as we go throughout the year. You will see some seasonality in demand and so forth. But right now we’re seeing global capacity somewhere in the mid-86%, 87% capacity utilization, with Europe and Americas in the mid-90%s and China substantially below that, probably even below 80%.

David Wang – Morningstar, Inc. (Research)

Hi, thank you for taking my question. I just had one on polyurethanes business. So I think you made a comment that MDI margins are expanding, and on the slide it shows that quarter-on-quarter pricing, at least in local terms, was flat. So I was wondering if you could walk us through what’s driven the improvement in margins? Is it lower costs? And is the margin impacted by a mix shift between your components and differentiated businesses? Or are they expanding in both segments?

Peter R. Huntsman – President, Chief Executive Officer & Director

Well, we are seeing an expansion, as I said, in the comments of 6% in our downstream differentiated basis. We’re also seeing a 20% drop in benzene raw material costs and so forth. So I think it’s a combination both of raw material benefits and also moving further downstream and improving margins there.

J. Kimo Esplin – Chief Financial Officer & Executive Vice President

And remember, we saw some growth, so 4% global growth on our volumes is greater than $10 million of EBITDA as well on a year-over-year basis.

David Wang – Morningstar, Inc. (Research)

Right. And presumably your competitors would also benefit from the drop in benzene raw material costs. So would you expect to see greater pressure, at least on the component side for margins going forward?

Peter R. Huntsman – President, Chief Executive Officer & Director

Not really. We’re looking at capacities in Europe and the Americas in the mid-90%s. I don’t see that the market is sloppy enough to be giving away raw material fluctuations and so forth. So, no, I don’t see that at this point.

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