Huntsman Corporation

Hello, and welcome to the Huntsman's second quarter 2023 earnings conference call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may press star one at any time to be placed in the question queue. We ask you please ask one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Ivan Marcuse, Vice President, Investor Relations and Corporate Development. Please go ahead.

Thank you, Kevin. Good morning, everyone. Welcome to Huntsman's second quarter 2023 earnings call. Joining us on the call today are Peter Huntsman, Chairman, CEO, and President, and Phil Lister, Executive Vice President and CFO. Yesterday, July 31st, 2023, after the U.S. equity markets closed, we released our earnings for the second quarter 2023 via press release posted to our website, Huntsman.com. We also post a set of slides and detailed commentary discussing the second quarter 2023 on our website. Peter Huntsman will provide some opening comments shortly, and we will then move directly into a question and answer session for the remainder of the call. During this call, let me remind you that 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 guaranteed of future performance. You should review our filings with SEC for more information regarding the factors that could cause the 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. We also refer to non-GAAP financial measures such as adjusted EBITDA, adjusted net income or loss with free cash flow, and you can find a reconciliation to the most directly comparable GAAP financial measures in our earnings release, which has been posted to our website, huntsman.com. I'll now turn the call over to Peter Huntsman, our Chairman and CEO.

Thank you for joining us this morning. We hope that you like our new format that is designed to give our results to the market earlier and to provide more time for meaningful review, questions, and comments. Before opening the line for questions, I'd like to take a moment and summarize some of the broader observations that we see at this present time. As we have an early but still rather murky view of the third quarter, some fundamental trends are shaping up. In our North American markets, particularly around MDI and construction demand, I believe that we're seeing the end of prolonged inventory destocking. While this is not the case for all products and applications, we are seeing demand follow more seasonal trends. There are currently fewer homes and commercial real estate projects being built than we saw 12 or 18 months ago. However, order patterns would tell us that much of this destocking has ended and we're in the early recovery of building starts as we move into the next year. Commercial construction may take a bit longer to recover. We continue to see growth in our Asian and specifically our Chinese markets. This growth would be best characterized as modest while pricing trends for MDI are also inching upward. Short of a major government initiative to spur faster economic growth, it appears that the second half of 2023 will continue to see modest seasonally adjusted improvements. A broader European recovery still feels as though it is yet to come. Pricing is very aggressive as companies fight for what demand is available. Energy prices are down from their recent historical highs, but still multiple times higher, than energy costs in the Americas or Asia. Energy and economic policies and regulations in Europe do not seem to adequately address the growing uncompetitiveness and deindustrialization that is taking place. Europe is losing its ability to export while also seeing more raw materials imported from abroad, particularly in products where new capacity has been added and demand in domestic markets are unable to absorb new production. As I look at our overall portfolio products, unlike past recessions and downturns in the economy, we have maintained decent margins in many of our businesses. Our biggest problem today is simply demand. While we do not expect any sudden improvements in the second half of the year, we do see green shoots in many areas of North America and China, but less so in Europe. I believe that the worst of the de-inventoring, particularly North America, is behind us, We're obviously much closer to a more fulsome recovery. We're in a unique position to take advantage of this coming recovery given our product portfolio, lower costs, global footprint, and quality of customers and applications. So I think about a recovery and the steps that we need to get there. I can't help but think of Churchill's quote in 42, perhaps we are at the end of the beginning. To this end, we will continue to preserve our balance sheet and review our portfolio for both possible divestitures and acquisitions. We are ahead in our efforts to streamline our costs, and we'll continue to not only look at costs, but working capital as well. We are dedicated to returning value to shareholders in the form of earnings, dividends, and share repurchases. Operator, with that, why don't we open the line for any questions?