Huntsman(US:HUN)2022-04-28 22:13Financial Data and Key Metrics Changes - Adjusted EBITDA increased by $116 million to $415 million, a 44% improvement compared to Q1 2021, with a sequential improvement of $66 million or 19% [36] - Adjusted earnings per share rose to $1.19 from $0.65 in Q1 2021, reflecting strong financial performance [46] - Free cash flow was positive despite over $200 million of working capital inflation due to rising raw materials and energy prices [42] Business Line Data and Key Metrics Changes - Polyurethanes division reported adjusted EBITDA of $224 million, an 8% increase year-over-year, with revenues growing by 30% primarily due to price increases [6] - Performance Products achieved adjusted EBITDA of $146 million, a 57% increase in revenues, with adjusted EBITDA margins rising to 30% [18] - Advanced Materials reported adjusted EBITDA of $67 million, the strongest quarter in the division's history, with a 20% adjusted EBITDA margin [25] - Textile Effects division's adjusted EBITDA was $28 million, 12% above the prior year, with a record margin of 14% [31] Market Data and Key Metrics Changes - Volumes growth in the Americas region was 7%, followed by Asia at 4% and Europe at 2% [7] - The company expects to be negatively impacted in Asia, specifically China, due to government-mandated lockdowns [8] - The European market remains stable despite the ongoing war in Ukraine, with demand driven by construction and adhesives [8] Company Strategy and Development Direction - The company is focused on a value-over-volume strategy, aiming to enhance margins by upgrading to higher-value products [12] - Strategic investments include the new MDI splitter in Geismar, Louisiana, expected to add $45 million of annual EBITDA by 2024 [13] - The company is pursuing targeted capital investments in polyurethane catalysts and differentiated chemicals for electric vehicles and semiconductors [22] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about overall demand due to geopolitical tensions, inflation, and COVID-related lockdowns in China [70] - Despite challenges, management remains optimistic about maintaining strong margins and pricing power [73] - The company expects second quarter adjusted EBITDA for polyurethanes to be in the range of $210 million to $230 million [17] Other Important Information - The company has a strong balance sheet with total liquidity of $2.3 billion and net debt leverage of 0.5x [45] - A dividend increase of $0.10 per share or 13% was announced during the first quarter [46] - The company plans to repurchase approximately $1 billion of shares in 2022, with a total return of capital to shareholders expected to be around 15% [47] Q&A Session Summary Question: Can you talk about the aerospace recovery? - Management indicated that the aerospace segment is recovering, currently at a $60 million run rate, with expectations to return to pre-COVID levels by the end of next year [58][60] Question: Are you more optimistic about Performance Products' long-term targets? - Management leans towards a long-term margin target of 25% rather than 20%, citing strong demand and pricing discipline [62][64] Question: How should we think about the second half of the year? - Management believes the second half could be as strong or stronger than the first half, but expressed concerns about overall demand and potential impacts from China [68][70] Question: Can you discuss MDI manufacturing competitiveness in Europe? - Management feels confident about their position in the Netherlands, benefiting from renewable energy sources and a strong customer base [75][76] Question: Will you consider adding capacity moving forward? - Management is focused on internal projects for efficiency rather than large greenfield investments, preferring to upgrade existing capacities [81][119]