Huntsman Corporation Q2 2010 Earnings Call Transcript

Huntsman Corporation Q2 2010 Earnings Call Transcript
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Huntsman Corporation (HUN)

Q2 2010 Earnings Conference Call

August 5, 2010 10:00 AM ET

Executives

Kurt Ogden – VP, IR

Peter Huntsman – President and CEO

Kimo Esplin – EVP and CFO

Analysts

Louisa Herman – Goldman Sachs

Frank Mitsch – BB&T Capital

Eric Petri – Citi

Roger Spitz – Bank of America Merrill Lynch

Amanda Sigouin – Jefferies & Company

Bill Young – ChemSpeak

Philip Birbara – RBS

Bob Cornell – Barclays Capital

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the second quarter 2010 Huntsman Corporation earnings conference call. I will be your coordinator for today.

(Operator Instructions)

I would now like to turn your presentation over to Mr. Kurt Ogden, Huntsman’s Vice President of Investor Relations.

Kurt Ogden

Good morning everyone. Welcome to Huntsman’s second quarter 2010 earnings call. Joining us on the call today are 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 second 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, acquisition-related expenses, unallocated foreign exchange gains and losses, and losses from the early extinguishment of debt.

We focus on adjusted EBITDA from a management standpoint as we believe it is the best measure of the underlying performance of operations. And we have received feedback from many of you in the investment community that this is how you prefer to look at our business. A reconciliation of EBITDA, adjusted EBITDA and adjusted net loss/income can be found in the appendix of our slides and in our second quarter earnings release.

Let’s go ahead and turn to slide number two. In our earnings release this morning, we reported second quarter 2010 revenue of $2,343,000,000; adjusted EBITDA of $257 million and adjusted earnings per share of $0.31 per diluted share. Our adjusted EBITDA increased to $257 million in the second quarter 2010, compared to $93 million in the prior year and $123 million in the prior quarter. The improvement in earnings compared to both periods was overwhelmingly the result of improved demand and corresponding higher sales volumes across all of our businesses.

We look forward to sharing more details about this improvement with you. I will now turn the call over to Peter Huntsman, our President and CEO.

Peter Huntsman

Thank you very much, Kurt and thank you to everybody for joining us this morning. Let’s turn to slide three to talk about our Polyurethanes division. Our Polyurethanes division adjusted EBITDA of $71 million reflects two separate trends within the division. More specifically earnings with our MDI urethanes business continued to improve whereas Propylene Oxide/MTBE earnings have declined.

In the second quarter sales revenue for our MDI urethanes business increased 34% compared to the prior year and 9% compared to the prior quarter. The favorable increase in revenue was primarily due to a combination of strong demand in MDI growth and higher selling prices implemented to offset higher raw material costs.

In Europe, our largest market, we saw double digit growth in both a year-over-year and sequential basis largely as a result of strong demand for installation even with an overall soft construction market.

We saw strong sales volume growth in the Americas despite a slow housing market. MDI substitution for other less efficient products is most evident in these more developed economies. Overall demand in Asia slowed somewhat in the second quarter compared to the first but increased compared to the prior year as customers reduced inventories and some Chinese government stimulus initiatives ended.

Price initiatives were announced in all regions and are progressing but overall margins were squeezed with the increase of raw material cost. Strong demand for MTBE outside the United States has attracted additional production capacity in the U.S. to supply the market. The second quarter MTBE Gulf Coast sea factor, which is a published industry benchmark used to set contract selling prices was half of what it was in the prior year. As a result, although our Port Neches, Texas facility is operating at full capacity following a turnaround in inspection in the first quarter, our PO/MTBE earnings were well below normalized level.

Let’s turn to slide four and focus on our Performance Products division. Earnings within this division improved tremendously to a $116 million. Although $15 million of this was the result of a non-recurring credit related to our Sasol-Huntsman Maleic Anhydride joint venture in Moers, Germany. I am very pleased with the underlying performance of this business.

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