Huntsman Corporation

Greetings and welcome to Huntsman's Third Quarter 2025 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires 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 your host, Ivan Marcuse, Vice President of Investor Relations and Corporate Development, Thank you. You may begin.

Thank you, Donna. Good morning, everyone. Welcome to Huntsman's third quarter 2025 earnings call. Joining us on the call today are Peter Huntsman, Chairman, CEO, and President, and Phil Lister, Executive Vice President and CFO. Yesterday, November 6, 2025, we released our earnings for the third quarter 2025 via press release and posted it to our website, huntsman.com. We also posted a set of slides and detailed commentary discussing the third quarter 2025 on our website. Peter Hoskins will provide some opening comments shortly, and we will then move into the 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 future-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, the risk factors that could cause actual results to differ materially from the 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 for the most direct and comparable GAAP financial measures in our earnings release, which has been posted to our website. I'll now turn the call over to Peter Huntsman.

Ivan, thank you very much, and thank you for all those taking the time to join us this morning. Before getting to our Q&A, I'd like to take a few minutes and speak about present market conditions. First of these is the change in our dividend distribution. Every quarter, our Board of Directors deliberates and spends considerable time discussing this matter. We take into consideration a number of factors in determining what should be paid and what should be preserved. Our industry faces three challenges that in their duration and magnitude are unprecedented. First, we see the U.S. economy, the effects of several years of decades high inflation, and the rising of interest and mortgage rates. This has put enormous pressure on consumer durables and home building. In particular, fewer and smaller homes are being built and consumers are spending less money on large durable items. The second is the lack of consumer confidence and spending in China. While at the same time, the country has built out their manufacturing capacity that is not being absorbed domestically and in many cases are flooding markets that struggle to absorb their own domestic production and increased imports. The third of these challenges is the deindustrialization of Europe. Between burdensome bureaucracies and regulations, high business and climate-related taxes, and uncompetitive energy and raw material costs, Europe is not attracting innovation, growth, or investment. In fact, in the second half of 2025, we're likely to see more industrial closures than we have seen in the first half. We believe that the U.S. and China economies will recover to more stable conditions as trade tensions ease, interest rates drop, and consumer confidence in spending returns. Europe will see more of its manufacturing leave unless they change a number of policies very quickly. As industry shuts, it will be relocated to the U.S., Asia, or the Middle East. As these capacities relocate, we will see these markets stabilize as the remaining European companies adjust to new supply chains and perhaps a more consolidated industry. Aside from simply waiting for better times, what will Huntsman continue to do? We will continue to calibrate our cost structure to the market realities that we're seeing. We are on track to completing our previously announced $100 million cost reduction program, This includes the elimination or relocation of over 600 positions and the closure of seven sites, mostly in Europe. These efforts will continue through 2026, and we're well on track to meet and likely exceed these targeted savings of $100 million. In addition to cost and asset footprint, our priority has been to manage our cash consistent with a prolonged downturn. We delivered $200 million of operating cash this quarter, and our year-to-date free cash flow is over $100 million. We moved early and aggressively on working capital this year, and I believe we made the right call to do so. We're also looking at more energy-intensive raw materials and exploring ways wherein we can source these supplies from other regions with more competitive costs. Europe will continue to be a vital market for our company. Areas such as aerospace, automotive, adhesives, and electronics will not only be profitable, but growing markets for Huntsman. However, we need to continue to look at our supply chains and source the most profitable raw materials. An example of this is our recent closure of our Malay facility in Moors, Germany. We will continue to support our Malay customers in Europe, but we will do so from the U.S., where we can make Malay cheaper and deliver it at higher margins. We'll continue to look at our urethanes, amines, and epoxy supply chains and assess how we can avoid Europe's uncompetitive cost structure. These include working within our own company, as well as working with other industry players. We will continue to work with other manufacturers to maximize our capacities and competitiveness on the products we produce and supply globally. This includes exploring opportunities for consolidations, rationalizing capacities, and other value enhancing combinations. I believe that our actions will create further value. Not all of them will happen, but we will continue to explore every chance we have. We also need to make sure that we protect our balance sheet for the long term. Our latest dividend levels were set when market conditions were far different than they are today. Our priority was to return cash and value to shareholders. This priority has not changed, but it has taken into consideration current market conditions. These are not times when we ought to be taking on more debt to pay a higher dividend. After careful deliberation, we believe that we have found the right balance to reward our shareholders, preserve our balance sheet, and invest in the future. As soon as market conditions warrant, consideration for an increase in our dividend payments will take place. Believe me, we'll be doing this as quickly as possible, and I hope this happens sooner rather than later. Lastly, as we look into the fourth quarter, it is simply too early to make forecasts for 2026. Most supply chains are very tight. Visibility is short-term, as it usually is this time of year. I believe in the fourth quarter that we will see typical seasonality coupled with a higher than average destocking. Earlier this year, some companies bought into the idea that Europe was somehow rebounding and demand was picking up. This has clearly not been the case. We may see conditions in the fourth quarter, especially in Europe, where prices drop as companies push to cut inventories and manage working capital. During the fourth quarter, we will continue to prioritize cash over EBITDA, especially in our performance products division. Our objective is to finish this year with inventories that allow us to produce to meet demand. As we end the third consecutive year of challenging markets in all three regions of Asia, North America, and Europe, I believe that we're taking the tough steps today to assure our future as one where we are able to recover quickly as market conditions allow us to do so. We will continue to explore every means and structure possible aside from simply waiting and doing nothing. With that, operator, we'll open the lineup for questions.