Huntsman Corporation

Greetings and welcome to the Huntsman Corporation first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If any of us require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ivan Marcuse, VP of IR and Corporate Development. Thank you. You may begin.

Thanks, Darrell. Good morning, everyone. Welcome to Huntsman's First Quarter 2024 Earnings Call. Joining us on the call today are Peter Huntsman, Chairman, CEO, and President, and Phil Lister, Executive Vice President, CFO. Yesterday, May 2nd, 2024, after the U.S. markets closed, we released our earnings for the First Quarter 2024 via press release and posted it to our website, Huntsman.com. We also posted a set of slides and detailed commentary discussing the First Quarter 2024 on our website. Peter Huntsman will provide some opening comments shortly, and we will then move to a question and answer session for the remainder of the call. During this call, let me remind you that we may make statements about 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 the SEC 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 this quarter. We will also refer to non-GAAP financial measures such as adjusted EBITDA, adjusted net income or loss, and free cash flow. You can find reconciliations 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.

Ivan, thank you very much, and thank you all for taking the time to join us this morning. Reviewing the results of the first quarter, a few things of note are emerging. I said in our fourth quarter conference call on the 22nd of February that our number one priority this year was to recover lost volumes. During the first quarter, we were able to make some modest gains and will be doing more throughout 2024. The gains that we saw in volume were attributed to a combination of new business, demand growth, and pockets of inventory restocking. We question how much of this was the end of inventory destocking and the beginning of inventory rebuilding versus demand growth. While it will vary customer by customer, I believe it to be about 50-50. I should also say that eventually the two conditions merge into one gray area. Demand improvement begets inventory restocking. However, the bigger issue is when do markets recover sufficient to achieve pricing recovery? Today's levels of profitability, particularly in Europe, are below reinvestment levels and in some cases are still below positive cash generation. I'm happy to see 25% growth in our North American MDI demand in Q1. We should remember that this is compared to Q1 of 2023. where demand had dropped 35% from 2022. All this noise means that we are moving back to where we were merely a year ago. To have a real return to normalized market conditions, we're going to need consistent demand improvement and, equally important, higher prices to expand margins. During the last call, we also outlined the need to improve our cash flow. While we're seeing improvements in this area as well, we may face headwinds in working capital later in the year as sales volumes and prices move up. Our third priority in 2024 is our continued focus on our costs in the face of global inflationary and regulatory pressures. We continue on track to meet all the objectives we announced to offset projected 3% to 4% global inflation. Our fourth priority is to continuously assess our portfolio and make sure we're maximizing the value of the assets we own and how we deploy capital for growth. Finally, we continue to focus on our environmental and safety performance. This is our license to operate, and regardless of business conditions, we will not compromise on the safety of our operations. This focus on risk also applies to our balance sheet. We will not jeopardize our investment grade rating for short-term gains. All in all, I'm not surprised by the results and conditions that we're seeing. Our quick action on cost, capacity rationalization, and discipline with pricing will serve us well as the industry continues to recover. Our objective is to take quick and decisive actions in advantage of these improving conditions and get us back to normalized earnings as quickly as possible. With that, operator, let's turn the remaining time over to questions and comments.