Huntsman Corp (HUN) Q1 2024 Earnings Call Transcript Highlights: Strategic Insights and ...

GuruFocus Research

Sat, May 4, 2024, 1:07 AM 4 min read

Volume Growth: Modest gains in Q1 2024, attributed to new business, demand growth, and inventory restocking.
North American MDI Demand: 25% growth in Q1 2024 compared to a 35% drop in Q1 2023.
Profitability: Current levels in Europe are below reinvestment levels and in some cases, below positive cash generation.
Cash Flow: Improvements noted, potential headwinds from working capital expected later in the year.
Cost Management: On track to offset projected 3% to 4% global inflation.
Capital Deployment: Continuous assessment to maximize asset value and strategic capital growth.
Environmental and Safety Performance: Maintained focus despite business conditions.
Balance Sheet: Maintaining investment-grade rating, avoiding jeopardizing for short-term gains.

Warning! GuruFocus has detected 6 Warning Signs with HUN.

Release Date: May 03, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Huntsman Corp reported a 25% growth in North American MDI demand compared to Q1 2023.
The company is seeing improvements in cash flow and is on track to meet objectives to offset projected 3% to 4% global inflation.
Huntsman Corp continues to focus on cost control in the face of global inflationary and regulatory pressures.
The company is actively assessing its portfolio to maximize the value of assets and strategically deploy capital for growth.
Huntsman Corp remains committed to environmental and safety performance, maintaining its license to operate without compromising operational safety.

Negative Points

Profitability levels, especially in Europe, remain below reinvestment levels and in some cases, below positive cash generation.
The company faces challenges in achieving pricing recovery necessary to expand margins and return to normalized market conditions.
There are potential headwinds in working capital later in the year as sales volumes and prices increase.
Advanced Materials volumes were down year-on-year, reflecting underlying demand challenges despite easier comparisons.
The company is still about 10% to 15% below normal volume levels in polyurethanes in North America and Europe, indicating a need for further market recovery.

Q & A Highlights

Q: Some of your comments in the prepared remarks reflect a slightly more positive view on China. Can you highlight where you're seeing some strength with end markets and what you expect to be growth drivers throughout the year? A: Peter R. Huntsman, Chairman, President & CEO of Huntsman Corporation, noted significant demand growth in the automotive sector, particularly in electric vehicles (EVs), which are expected to continue growing. He also mentioned strength in energy conservation and infrastructure projects in China, despite sluggishness in residential construction.

Q: Advanced Materials volumes were down year-on-year, even facing the easier comp. Is there any element of whether it's value over volume or lower-margin product exits there? A: Peter R. Huntsman explained that while some segments like aerospace and automotive in Advanced Materials are expected to grow better than GDP, the company is also deselecting lower-margin, commoditized products to focus on higher-value applications.

Q: How do you think about the pace of business in polyurethanes, not just in North America, but as we play out through the year? A: Peter R. Huntsman expressed optimism about the polyurethanes segment, expecting a slow and steady recovery, particularly in construction, with modest growth anticipated in the coming quarters.

Q: Looking at the longer-term EBITDA, what will it take and how long will it take to get back to that $1 billion threshold that you've exceeded in the past? A: Peter R. Huntsman outlined several initiatives including operational efficiencies, new expansions, and strategic projects expected to contribute significantly to EBITDA growth. He emphasized the need for market recovery and successful execution of these projects to reach the $1 billion EBITDA level.

Q: As you talk to your customers in building and construction in the United States, how fast do they seem to indicate markets will start to move once we move into a less restrictive monetary policy? A: Peter R. Huntsman highlighted a sense of optimism among builders, who are preparing for scenarios both with sustained current rates and potential rate cuts. He noted that any reduction in rates would likely boost demand significantly.

Q: Pretty impressive volumes in polyurethanes in North America and Europe. Can you just tell us where are your volumes today in these two regions versus what you would consider a normal volume level? A: Peter R. Huntsman and Philip M. Lister, EVP & CFO, acknowledged that while there has been significant volume growth, levels are still not back to normal. They are optimistic about continued recovery and emphasized the need for further growth and pricing improvements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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