Huntsman Corporation

Greetings and welcome to the Huntsman Corporation first quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Ivan Mancuso, Vice President of Investor Relations and Corporate Development. Please go ahead, sir.

Thank you, Melissa. And good morning, everyone. Welcome to Huntsman's first quarter 2025 earnings call. Joining us on the call today are Peter Huntsman, Chairman, CEO, and President, and Phil Lister, Executive Vice President, CFO. Yesterday, May 1st, 2025, we released our earnings for the first quarter of 2025 via press release and posted to our website, huntsman.com. We also posted a set of slides and detailed commentary discussing the first quarter 2025 on our website. Peter Huntsman will provide some opening comments shortly, and we will then move to question and answer session for the remainder of the call. During the 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 guarantees 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 the 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 at Huntsman.com. I'll now turn the call over to Peter Huntsman. Ivan, thank you very much.

Just over two months ago at our last earnings call, I started my comments by explaining why we did not give yearly guidance, but rather focused on quarterly guidance. And that was just before the first week of April when Liberation Day liberated the New York Stock Exchange to some $3 trillion of value. Before reciprocal tariffs, 90-day pauses, and 500-plus percent tariff rates were put on most goods flowing between the world's two largest and interdependent economic systems, along with varying degrees of tariffs on just about every trade flow in the world. Today, I'm not sure if we can tell you what's going to be happening between now and the end of the week in either the macro economy or our own petrochemical industry. I would assume that most CEOs who have already reported their numbers, if they were to report again today, would be changing their outlook. I want to see if we can take and make some sense as far as what we're seeing as far as what is happening today and some of the longer-term implications for Huntsman that we see as of today. Much of what we are seeing in our supply chains is a literal disconnect between orders and downstream demand. We see build rates for cars drop low single-digit percentages, and by the time the supply chains move through OEMs and down to us, we are seeing double-digit drops in some order patents. It is not unlike what happens when someone taps the brakes on a fast-moving freeway and the car behind them applies greater pressure. Three or four cars further back, cars are literally skidding to a halt. Now, I do not see vehicle production, housing materials, airplanes, and power grid components dropping by double-digit margins. However, I am seeing in the past few weeks suppliers panic and in a world of great and changing uncertainties, lowering inventories, preserving working capital, and stopping supply chains, especially those moving overseas. Will these conditions remain permanent? I think that is very highly unlikely. I would see a scenario not unlike 2020 when supply chains and inventories froze, and the world stood in a state of paralysis as consumers, manufacturers, and suppliers tried to make sense of the short term. I see much, if not all, of the short-term supply and demand issues driven largely by the unknown and uncertain conditions likely being resolved in the next few months as trade deals get done, alternate supply lines and sources emerge, and the dust from Liberation Day finally settles. Other aspects of this will be longer lasting. North American MDI tariffs is a good example. This past year, nearly 400,000 tons were imported into the United States and the Americas market, with about 75% of that coming from China. This represents between 20 and 25% of the total domestic demand for the entire year. Just in the month of January of this year, more than twice the amount of MDI that was imported a year ago was imported into the United States. By the end of the quarter in March, imports had dropped by 60% into the Americas and greater than 75% from China. And it appears that this drop will continue into the second quarter as only one kiloton of MDI from China came into the Americas in the first week of April. These tariffs seemingly are larger, longer term in nature, and I believe may have a greater impact on the Americas. Huntsman produces virtually all of our Americas material in North America. We're in an ideal location to benefit from this. More specifically, during the latter part of the first quarter of this year, as shipments from China were canceled, there seemed to be an oversupply of MDI on the Asian markets. Chinese MDI prices fell as did raw materials. However, in the past week, these prices have stabilized and have actually recovered by 10%. Again, as we are well situated in our Chinese business, as all of our MDI supply is domestically produced with an excellent team of local associates that operate this business. Again, how long will this last? No one knows. But orders seems to slowly be coming about in China and the America's markets. Europe, on the other hand, is still trying to figure out if they have or even want an industrial policy. More to come on that one, no doubt. I do not see the impact of tariffs having a material impact, a direct material impact on our performance products and advanced materials divisions. I can't clearly see what impact this will have on our customers and markets, such as power and aerospace, but things seem to be moving towards a slightly more confident place than they were just a week ago. This past quarter, I told you that I thought we were seeing the bottom of MDI pricing, or better put, margins, as we had seen announced price increases across the U.S., EU, and China. I continue to believe this. though there may be a bit choppiness in the numbers. The MDI markets may well be seeing better margin expansion from falling raw material prices than from rising MDI prices. However, volumes will be of greatest importance. The present market uncertainties do not provide us or our customers confidence for longer-term inventory build and volume increase. We continue to be frustrated by the lack of a clear and realistic energy in European-wide industrial policy, which is needed to encourage investment by us and others in Europe. We will continue to aggressively look at our cost and organizational structure and calibrate that to a shrinking industrial base as we see more companies struggling under the burden of high energy costs, taxes, and regulation. In short, we will not be waiting for the market to turn in our favor and we'll continue to take the steps necessary to have a value creating business in Europe. We also continue to look for opportunities around the world that may provide a chance to increase our product footprint. While we are careful to protect our balance sheet, we will continue to assess our assets and explore possible opportunities in the marketplace to create shareholder value faster than just waiting for a market recovery. In short, we are focused on capitalizing on the short-term changes in volatility, aligning our costs to longer-term market realities, and exploring various options to enhance our portfolio and create greater shareholder value. With that, operator, we'll open the lineup for any questions.