Huntsman CEO Discusses Q3 2010 Results - Earnings Call Transcript
Huntsman Corp. (
)
Q3 2010 Earnings Call
November 04, 2010 10:00 pm ET
Executives
Kurt Ogden - VP, IR
Peter Huntsman - President and CEO
Kimo Esplin - EVP and CFO
Analysts
Robert Koort - Goldman Sachs
Laurence Alexander - Jefferies
P. J. Juvekar - Citi
Sabina Chatterjee - BB&T Capital Markets
Roger Spitz - Bank of America Merrill Lynch
Edlain Rodriguez - Gleacher & Company
Jeff Zekauskas - JPMorgan
Lior Jassur - HSBC
Andrew Cash - UBS
Herb Hardt - Monness
Presentation
Operator
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Huntsman Corporation. Q3 2009 Earnings Call Transcript
Good day, ladies and gentlemen, and welcome to the Huntsman Corporation Third Quarter 2010 Earnings Conference Call. My name is Jen, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s conference. (Operator Instructions).As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the presentation over to your host, Mr. Kurt Ogden, Huntsman Corporation’s Vice President of Investor Relations. Please proceed, sir.
Kurt Ogden
Thank you, Jen, and good morning, everyone. Welcome to our third quarter 2010 earnings call. Joining us on the call today are Jon Huntsman, our Executive Chairman and Founder; Peter Huntsman, President and CEO; and Kimo Esplin, Executive Vice President and CFO.
This morning before the market opened, we released our earnings for the third quarter 2010 via press release and posted it on our website, huntsman.com. We also posted a set of slides on our website, which we intend to use on the call this morning in the discussion of our results.
During this call, we may make statements about our projections or expectations for the future. All such statements are forward-looking statements, and, while they reflect our current expectations, they involve risks and uncertainties and are not guarantees of future performance. You should review our filings with the Securities and Exchange Commission for more information regarding the factors that could cause actual results to differ materially from these projections or expectations.
We do not plan on publicly updating or revising any forward-looking statements during the quarter. In addition, we may also refer to non-GAAP financial measures. You can find reconciliations to the most directly comparable GAAP financial measures in our earnings release posted on our website at huntsman.com.
As we refer to earnings, we will be referring to adjusted EBITDA, which is EBITDA adjusted to exclude the impact of discontinued operations, restructuring, impairment, and plant-closing costs; income and expense associated with the terminated merger and related litigation; the sale of accounts receivables; acquisition-related expenses; unallocated foreign exchange gains and losses; losses from the early extinguishment of debt; and losses and gains on disposition of businesses and assets.
We focus on adjusted EBITDA from a management standpoint, as we believe it is the best measure of the underlying performance of our operations. And we have received feedback from many of you in the investment community that that is how you prefer to look at our business. A reconciliation of EBITDA, adjusted EBITDA, and adjusted net income or loss can be found in the appendix of our slides in our third quarter earnings release.
Let’s turn to slide 2. In our earnings release this morning, we reported third quarter 2010 revenue of
million, adjusted EBITDA of 273 million, and adjusted earnings per share of $0.34 per diluted share. Our adjusted EBITDA increased to 273 million in the third quarter 2010 compared to 205 million in the prior year and 257 million in the prior quarter. The improvement in earnings compared to both periods was primarily the result of improved demand and corresponding higher sales volumes across our business. Peter and Kimo will provide greater insight into the improvements within our business.
I will now turn the call over to Peter Huntsman, our President and CEO.
Peter Huntsman
Kurt, thank you very much. And thank you to everybody who’s taken the time to join us this morning. Let’s turn to slide number 3. Adjusted EBITDA for our Polyurethanes business in the third quarter of 2010 was $102 million. We’ve seen two separate earnings trends occur within this business. More specifically, our MDI business continues to improve, whereas, our Propylene Oxide/MTBE earnings have declined compared to last year. We are seeing a strong recovery in global demand for MDI. Revenues for MDI and related products increased 11% compared to the prior year as a result of increased demand and an improvement in average selling prices.
In Europe, our largest market, sales volumes were limited as a result of supply limitations and force majeures on certain product lines, most noticeably in automotive and furniture. We saw strong demand in all regions for adhesives, coatings, and elastomer products, as well as automotive, insulation, and composite wood product sectors, all of which were partially offset by weaker demand in appliances. As we consider the broad trend affecting our business, sales into the Insulation markets increased 9% compared to the second quarter and 6% compared to the prior year.
This is our largest sector, which represents approximately 40% of our volume. We are confident in its growth trajectory. Despite little to no improvement in housing starts, our composite wood products revenues increased 16% compared to the prior year, driven in large part by increased momentum in the wood industry to find formaldehyde-free substitutes. We estimate that the MDI industry operated at around 95% effective capacity in the third quarter, which due to published idle global capacity, we believe is approximately 88% of nameplate capacity.
MDI price initiatives were announced in all regions, and we are seeing some signs of progress. MDI margins improved on a sequential basis; however, they are still lower than in 2009 as a result of increased raw material costs. Outside the United States, there is a strong demand for MTBE as a fuel oxygenate. This demand has attracted additional production capacity in the US to supply the offshore market. The additional production capacity along with a global slowing in gasoline demand growth has had an effect of lowering margins. As a result, our Propylene Oxide/MTBE earnings were well below the prior year.
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