Huntsman Corporation

Greetings, and welcome to the Huntsman fourth quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. You may be placed in the question queue at any time by pressing star 1 on your telephone keypad, and we ask that you please ask one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star 0. It's now my pleasure to turn the call over to Ivan Marcuse, Vice President, Investor Relations and Corporate Development. Please go ahead, Ivan.

Thank you, Kevin, and good morning, everyone. Welcome to Huntsman's fourth 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, February 17, 2026, we released our earnings for the fourth quarter 2025 via press release and posted to our website, Huntsman.com. We also posted a set of slides and detailed commentary discussing the fourth quarter on our website. Peter Huntsman will provide some opening comments shortly, and we will then move into the 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 and 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. I will now turn the call over to Peter Huntsman, our Chairman, CEO, and President.

Ivan, thank you very much. As we reviewed 2025 results, I think it is worth commenting on a bit on this past year and on our focus on 2026. I often end my prepared remarks with these words. We will continue to focus on what we can control and where we can create value. I do not say this to be repetitive, but rather to emphasize where our focus needs to be. Our industry started this past year, 2025, with optimism that North American housing was going to pick up, Chinese consumer confidence was going to recover, and Europe would finally realize their follies and do something to reinvigorate their industrial competitiveness. Instead, shortly after our call, Liberation Day was announced and markets and consumer confidence was thrown into chaos. China repositioned and rechanneled their trade and stood toe-to-toe against the U.S. while their domestic market slowed. Europe policymakers focused on what was making them uncompetitive and decided to double down and lost a record amount of chemical production throughout the year. In North America, we saw U.S. housing and durable goods struggle to show any growth. Despite these hurdles, we continue to cut and restructure our cost basis, closing multiple facilities. We achieved growth in most of our tonnage that exceeded the general market while attempting to lead multiple price increases. And perhaps most importantly, we converted 45% of our EBITDA to free cash flow, a higher percentage than many in the industry. As we look out over 2026, we anticipate a gradual recovery in North American home building and durable goods. as well as an improvement in the Chinese domestic markets. We are seeing some very early signs of both improved volumes and pricing in Europe. It is too early to say these increases will fully materialize, but we remain hopeful. While we don't control the outcome of these large macro changes, we will be more than ready to take advantage of any opportunities to expand margins and increase revenues should they come along, and by focusing on those items we can control and conditions we can influence. On the strategic front, I believe that 2026 will continue to be another year of changing market dynamics. Even if we start to see a recovery, we will likely see further opportunities for mergers, joint ventures, and industry consolidation. As always, we will be willing to engage with interested parties and push where there is an opportunity for value to be created. We will not be sitting on the sidelines waiting to see what comes along. Like 2025, we have set expectations internally to, at a minimum, generate enough cash to cover our dividend. This requires more than just moving inventory about, and we will continue to be focused on further structural change in how and where we do business to accomplish this. With regards to pricing and growth, we will push to grow our assets at a better pace than the general industry and do this by winning business through new product development and innovation, pushing to fill out capacities and upgrade materials through our MDI splitter in Geismar, capacity increases in high purity of means for the tech industry and catalysts, and expanding capabilities in material usage in aerospace, power, in the fast evolving auto industry. We will also be selectively using AI tools, if they make economic sense, to further reduce our costs, simplify our processes, and expand our R&D capabilities. In short, I hope that 2026 will be a year of recovery compared to 2025. The coming weeks should signal to what degree we will see demand returning to the North American construction industry and China's moves following the Chinese New Year's, the March National People's Congress, and President Trump's visit to China in early April. The next several weeks should be anything but boring. With that, operator will open the call up for questions and comments.

Certainly. We'll now be conducting a question and answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. As a reminder, we ask that you please ask one question, one follow-up, then return to the queue. If you'd like to remove yourself from the queue, please press star 2. Once again, that's star 1, and please ask one question, one follow-up, then return to the queue. Our first question is coming from David Begleiter from Deutsche Bank. Your line is now live.

Thank you. Good morning. Peter, you mentioned some potential improvement you're seeing in Europe. Can you dive down into what's driving that improvement and how long can that persist going forward in the year?

Yeah, I think as we look at Europe, two things that we see. We see price increases that have been announced across the board. Well, most everyone have announced price increases. There might be one producer out there that is not We're seeing a bit of a pickup in construction, as well as in auto. We also continue to see demand, not necessarily in polyurethanes, but in other divisions around the power segment, building out the infrastructure, as well as aerospace. So I want to emphasize that at this very call last year, I think in my comments, I commented that everybody in North America had announced price increases as well. And all of those fell through shortly after the chaos that ensued after Liberation Day. So again, I'm not trying to throw water on what we're seeing thus far into the quarter, but Europe right now, I'll take anything we can get and run with it.

Got it. And just in aerospace, how much did the business grow in 25? and how much do you expect the business to grow in 26? Thank you.

We expect the business to grow slightly better than the build rate. Again, I would just remind you there's a difference between the delivery rate and the build rate. If you go to some of the airline aircraft manufacturers, you'll see when you go to Toulouse or you go to Seattle, you'll literally see scores of planes that are waiting FAA certification. So You can see where an Airbus or a Boeing can show 15 deliveries, but a build rate that is much higher or much lower than that. Also, just as a reminder, we put a lot more product into wide bodies than we do narrow bodies. So when somebody says that they've got a record number of deliveries or production rates, we want to see more wide bodies. Just as a side note, the wide body production rate is still below, this year, is still below where it was in 2019. And that's not through lack of demand. There's still a backlog of years and years on wide body, pushing 10 years on wide body plants. It's the capability that both producers seem to have lost during the COVID era. So as we see that recovery in wide bodies, we also have announced in previous calls the penetration of our products and internal applications around adhesives and internal components. So when I say that we expect to grow better than the production rate, I say that meaning that we already have under contract a lot of the fuselage and the wings and so forth that we've had for some years, but we are picking up new business on a per plane basis that will gradually be benefiting us throughout the year as well. So Aerospace for us will continue to grow slightly better than the production rates of the wide-body planes in both Airbus and Boeing.

Thank you. Next question is coming from Kevin McCarthy from Vertical Research Partners. Your line is now live.

Thank you, and good morning. Can you refresh us on the amount of cost savings that you expect to flow through your financials in 2026 and where those might show up on a segment basis, please?

Yeah, Kevin, we targeted $100 million of cost savings overall, which was headcount reductions of approximately 500, which is almost 10% of the workforce, and closure of seven facilities. By the end of 2025, we'd actually achieved that annualized run rate of $100 million. The question is very specific to the in-year saving that we would expect in 2026. And that's about $45 million of in-year savings that we would expect to achieve, excluding any impact from inflation. And you should get some additional savings to come through as well in 2027. Okay, very helpful.

And then, Peter, I wanted to follow up on a comment that you made in your opening remarks to the effect that we may see more in the way of mergers, JVs, and industry consolidation this year. Were you referring to the industry in general, or do you see opportunities for those sorts of strategic actions in the polyurethanes arena, for example?

I think both. I think that if you look in in general is the most direct answer I can give. But I also have to look at where there is the most chaos. That's usually where you're seeing the largest number of divestitures, closures, possible joint ventures, and so forth. I take it something like MDI where in the U.S. you have four manufacturers. I would imagine that the cost curve between those four manufacturers is pretty steady. and it'd probably be pretty tough to see a merger take place of one of those four or two of those four manufacturers coming together. So the U.S. might be a rather limited area in the area of MDI. I look at someplace like Europe, I think the cost curve, again, this is just my opinion, but the cost curve in Europe when you look at facilities, an MDI facility that would be in Antwerp or in Rotterdam, And you compare just the integration and the scale, and then you take some facilities that are far smaller where they're taking raw materials, they're producing it in country A, moving it to country B where they're processing it into MDI, moving it to country C where they're splitting it. Again, you have a much greater cost curve in Europe. And I would assume that you've got leaders and laggers in Europe that you don't see in Asia. You don't see that in North America. That could easily precipitate possible closures. It could precipitate possible combination of assets taking place. And so I would say that it has to do with both the chaotic nature of the manufacturing footprint costs and so forth that are associated with that, But at the same time, look, the number of chemical companies there are today that produce polyethylene, for example, in North America are fewer than there were 15 years ago. Polypropylene, you look at the number of companies, look at the number of companies that are just our peers that are publicly traded. There's a general consolidation that's taking place, has been taking place. And I would assume that as you look and companies have cut the costs that they've cut, I imagine most companies have taken out all of the fat that exists and probably is now maybe even carving into muscle into certain areas. The next area that you're going to see for material cost savings is going to come about through possible mergers and so forth. So, again, these are just my observations, but I continue to believe that there will be opportunities uh, as there have been in 25 and 26. Now, does that mean they make financial sense? Uh, you've seen some very large companies that have just shut down assets, uh, some that have sold them off at a loss, others that have sold them for almost nothing. Uh, I mean, we, I think we were pretty public with our German Malay can hydride facility. We tried to sell it. Uh, we got to a point where we even tried to pay people to take it. And, uh, And we're unsuccessful in all of that. So we finally decided to shut it down. So every company is going to vary. And just because there's a deal out there doesn't mean that you've got to pursue it. But it does mean that there's, I believe, continues to be opportunity for churn.

Great. Thank you both.

Thank you. Next question is coming from Josh Spector from UBS. Your line is now live.

Yeah, hi. Good morning. I wanted to ask about your debt covenants that were updated a week ago and your outlook. I guess if I'm doing some math right, you need to be above six times net debt to EBITDA. That means your EBITDA in 1Q through 3Q needs to go up from about 60 to 80 to 100. I guess, one, is that about right? Because I recall some of your prior agreements had some adjustments that maybe added some EBITDA temporarily. And two, just your level of confidence of achieving that step up if the industry doesn't improve.

Yeah, Josh, it's Phil. So we posted our credit agreement and the new banking group on Friday. And if you want, you can look through all 160 pages, but I'll give you the synopsis of that. Good banking group, pleased with the agreement overall. And you're right, the agreement has definitions of consolidated EBITDA, which are different to the adjusted EBITDA that we state publicly. In addition to that, there are certain baskets as well. I'm not concerned at all in 2026 about the leverage ratios. I think that adjusted EBITDA, as we publicly quote, would have to drop to something well below $100 million on an LTM basis for us to even have a conversation about those leverage ratios. So I'm not concerned and I'm pleased with the agreement that we put out on Friday.

Okay, so there is then some sort of adder of a sizable amount, I guess, to bridge that gap, which I guess I should read that document to find more of. Can you size it itself now, or is it more complicated than that?

You have various definitions to decide it, but you can see in the details. But you've got more than a couple hundred million dollars there, and I'm not concerned in the least about those ad backs and the coverage ratio.

Great. Thank you, Phil.

Thank you. Next question is coming from Mike Harrison from Seaport Research Partners. Your line is now live.

Hi. Good morning. Peter, was hoping that you could talk in a little bit more detail about how you're thinking about MDI margins playing out over the next quarter or two. It sounds like in polyurethanes you're still expecting overall margins to kind of be under pressure, but I'm curious where you might be maybe a little bit more optimistic.

Well, I think two things when you think about margins expansion. One is what is the industry doing around volumes? And obviously, the more that you sell out of a fixed asset, the better your margins are going to be, even if pricing doesn't change. And so typically going into the March, April, May timeframe, you're usually seeing demand picking up. quite substantially. I don't see anything right now, at least, that is equivalent to the liberation day we saw a year ago that kind of threw people into chaos. Interest rates are steady, if not dropping a very small percentage. Homes are becoming more affordable as builders are building smaller homes. and in simpler homes, if you will. And I remain optimistic, having spoken to some of our customers and having spoken to some of banks and lenders and so forth in this area, that recovery in volume is going to be something that we should see increasing over the next two quarters here. I would also hope that pricing initiatives that have already been set, we sent out price increase notifications yesterday in our MDI business in North America, largely to offset rising benzene and natural gas costs. That obviously needs to happen just to offset the headwinds of natural gas and benzene as similar price increases have gone into effect in Europe to offset those costs. and hopefully gain some traction there. And China will probably have to wait until after the Chinese New Year's that started yesterday. It goes into the early parts of March before we see what's happening in China where we're seeing an RMB price today of around 14,000 for polymeric MDI. So I anticipate that we will see both an improvement in volume demand and in pricing.

All right, and then for my follow-up, I was hoping that you could maybe give us an update on the potential for share gains in spray foam insulation in North America and kind of where do we stand in terms of rolling out that spray foam insulation product line in Europe and in Asia?

Well, Europe and Asia, we're going to continue to look at opportunities there as they come and and perhaps looking at third parties and so forth. Our main focus on building solutions is going to be North America. We continue to make steady progress in gaining market share. And at the same time, we're also doing that with increasing margins and lowering our own costs, consolidating our manufacturing footprint, and providing customers with new solutions and new product innovation. I think that our building solutions, urethane spray foam business today is probably in as good a shape as it's been the last three or four years. So I continue to be optimistic about the direction of that business.

Thank you. Next question today is coming from Patrick Cunningham from Citibank. The line is now live.

Hi. Good morning. Thanks for taking my questions. Peter, you've taken a lot of steps to right-size the cost structure and footprint in Europe, particularly in polyurethanes. Do you still feel there's more to go from either you or the industry? And I know in the past you've been skeptical about things like anti-dumping or energy policy reform in Europe, but have any of the more recent calls to action or radical policy reshift given you any more encouragement at this point?

Yeah. Yeah, I remain hopeful that European policymakers will eventually do the right thing. As I had an opportunity a couple of quarters ago to meet with President Ursula von der Leyen, I told her they need to do three things. They need to restart their nuclear, refocus on nuclear production. They need to move away from this crazy Green New Deal that's run them into the ground. And I apologize to her for using the F word, but they need to start fracking. And so they, she said, she shook her head and said, yeah, we need to talk. The problem is there's just, there's too much talk and there's too little action. But I continue to be optimistic that action will come about. I believe that in Europe, look, we've got two issues there, and I've already touched on the first one of what I consider to be a very wide structural issue with the industry of small facilities that I question just how competitive they are. Again, I don't run one of those, and so I don't know what goes on in those boardrooms and so forth, but there does seem to be more capacity than needed to satisfy the industry. There is a pretty disparate cost curve in Europe, and Europe continues to struggle with high energy costs. And so I think that there needs to continue to be a consolidation or a refocus on those two things. As far as our cost structure in Europe, as I look at that cost savings of $100-plus million that Phil talked about earlier, most of those 500 reductions that we've seen in the company and the seven site closures, sadly, have taken place in Europe. Do we have more that we could be doing there? I really strain to see where there's large material change that can happen there by cost cutting. Further, I think that we want to position the business with the realization that Europe continues to be a $20 trillion economy. As much as we struggle in certain areas of polyurethanes, we continue to do very well in Europe in aerospace. in power, in coatings, in certain adhesion formulations, in our thermoplastics, polyurethanes, in elastomers businesses. So not all is on fire in Europe. I just think Europe's capable of doing a lot more than what they're doing. And we hope that we're able to see a recovery. I'd remind you that it was just four years ago, our most competitive MDI produced anywhere in the world was Europe. Europe was the most profitable company end of our MDI business a couple years ago. So it can be great again, and I'll spare Phil Lister saying let's make Europe great again. So we'll go on to the next question here.

Understood. And then maybe just on advanced materials, it seems to have a lot going for it entering into 2026. You have new wind, strong aero power businesses, and maybe some stabilization on some of the core coatings and infrastructure. So How should we think about growth in 26 and any sort of latent upside or operating leverage you may have for margins and what the sort of right margin levels we should think about?

I think that, look, advanced materials is going to be stable before anything else, but where we need to see the growth taking place and the margin improvement taking place is the segment of the industry where I believe we have the greatest opportunity for improvement. That's the Americas. Europe continues to be a strong segment for advanced materials. Asia continues to be a strong area. And the Americans, the Americas, and we will continue to see recovery as we see reindustrializations. We see building recovers. We see the PMI continue to recover in the Americas. And I continue to be very optimistic about that trend.

Thank you. Next question today is coming from Mike Sisson from Wells Fargo. Your line is now live.

Hey, good morning. Peter, can you talk a little bit about the cost curve now? You sort of mentioned that Europe used to be your highest or lowest cost or highest margin area. So, you know, where are we now maybe industry-wide for the regions? And then, you know, at some point, if things don't improve in Europe, I mean, what do you do with your assets there? Does it make sense to just reduce exposure and sell out the U.S.? Or, you know, what are the options if this downturn continues? Which I hope it doesn't.

Well, yeah, I hope it doesn't either. The Earth's got too much potential. And I think that what we're seeing right now, our biggest headwinds were, I look at our MDI productions. in Rotterdam versus Geismar versus Kaohsiung. We have basically the same technology. We have the largest line in Kaohsiung. We have the most lines in Geismar. We look at our cost for benzene in the three regions is basically flat. Our cost for chlorine and so forth is essentially flat. The big drivers is energy, is natural gas, and energy costs. And so that's what fundamentally needs to change in Europe. And unfortunately, today, I think that the seeds have been sown that I'm not sure that there's going to be a fast change taking place. Now, that's why we've made the fundamental changes that we've made in the last couple of years in Europe, which I think will address a lot of these issues going forward. The bottom line is that Europe, if demand is not going to improve and if they're going to leave themselves open for cheaper product to come in from Asia and from the U.S., eventually European policymakers have got to determine if they want to protect homegrown industry in Europe. And two macro things need to happen. There needs to be less production in Europe, and European policymakers need to decide if they want to stop cheaper products from coming into Europe.

Got it. And then just a quick follow-up on the industry consolidation potential. If Huntsman ends up being a buyer of stuff, where do you want to focus those acquisitions and then, you know, what are the potentials for Huntsman to divest stuff if things aren't going to improve longer term?

Well, we're going to, in my opinion, we're going to have to do both because we don't have the ability today and we're not going to go out today with the balance sheet that we have today and stretch that balance sheet and put it in jeopardy. So that's why I say my comments. We've got to be creative. We've got to be smart. And you've got to look at things such as joint ventures or possible mergers or some sort of consolidation play. And I think we can continue to expand and to grow. the business necessarily without going out and taking on more debt. Now, if we're able to sell something or monetize something, I think we've been very consistent over the last couple of years. Our primary focus is going to be to expand our applications and the footprint that we see in advanced materials. And we would like to invest in those type of applications. That's not necessarily saying that we're going to go out and we have to invest in epoxy. But when we look at areas like aerospace and adhesions, and we look at the power systems and so forth, we even look at some of the automotive areas that polyurethane is participating in around battery potting and so forth. These are going to be the sort of applications and product innovation that's going to be rewarded over the next decade. So where would we be buying? Probably, well, first of all, we're going to be buying where there's best opportunity, but it would be in that area. But again, I want to end this by where I started it, and that is we're not going to go out today and take the balance sheets we presently have. We're going to have to do some work before we go out and just start adding on more debt or see a material change in and an improvement in the industry.

Thank you. Our next question today is coming from Alexey Yefimov from KeyBank Capital Markets. Your line is now live.

Thanks, and good morning. This is Ryan on for Alexey. Peter, I wanted to go back to some earlier comments I kind of found quite interesting around affordability and maybe some improving conversations with customers. I was just wondering, are you maybe seeing improved order patterns from customers kind of ahead of maybe upcoming construction season, or is there something else on the radar? Just any additional color there would be much appreciated.

I think that it's simply too early to say, and I'm not trying to obfuscate. We had a very cold east coast, everything east of the Rockies in January, December. And I think that if anything, we're probably going to see a little bit of a delay of probably a couple weeks. We typically start to see construction orders start coming in about the middle of February, about now, and start building up through the month of March. And so that by April, you're seeing the full impact of what I would call a construction season. That obviously can be delayed through weather. It can be delayed in Asia because of a later Chinese New Year's, which is what we're seeing this year. So I think between a later than usual Chinese New Year's and a colder than usual Chinese winter months that we saw in North America. Now, I did say earlier, we are seeing what I would consider to be green shoots. And I want to emphasize, again, very early green shoots in Europe about a little bit better demand and pricing traction, you know, than we've had the last couple of years. So that's, again, I'll take anything I can get at this point. And we're going to nurture that and we're going to see, you know, make the most of that.

Right. Okay. That's helpful. And I was just curious, you guys made some comments in the prepared remarks just around kind of inventory levels in the U.S., but I was wondering if you could maybe comment on where you believe MDI inventories are in both Europe and Asia. Thank you.

Are you talking about our inventory levels or that of customers and the industry in general?

Just the industry in general.

I would say ours are very low. And again, I cannot speak for every customer that's out there, but just anecdotally, it feels like the supply chains between us and the consumer is quite low. And, you know, all companies right now in that supply chain are trying to control cash and trying to control inventories and working capital. building suppliers, OSB producers, auto industries that are having to write off billions of dollars on EVs and so forth. They're all focused on cash right now and inventory control. So one of the unknowns that we may well see going into 26 is, and I say this just having lived through a bunch of other events sudden rebounds in the industry. This industry typically does not recover over the course of four or five quarters. It usually gets to a point where people realize products are tight. And all of a sudden, we can't restock in time for a demand upswing. And all of a sudden, you find out there's shortages. And we look back in 2018, we look back on every couple of years, this seems to happen. I wouldn't be surprised if that were to happen in 26 in certain regions of the world.

Thank you. Next question today is coming from John Roberts from Azusa Securities. Your line is now live.

Thank you. Are you seeing any significant decline in price for merchant chlorine in the US? One of the major US suppliers talked about significant weakness in the merchant chlorine market.

No, I think it's been pretty steady. I'd love to see it collapse, but it's been pretty steady.

Okay. And then, sorry, I've forgotten that Europe was actually the most profitable MDI region for you. I think that it was less disadvantaged a few years ago, but I never really thought it was advantaged. What was the source of the advantage that Europe had over the rest of the world?

We had, again, I'm speaking for Huntsman. I'm not speaking for our competitors. We had a lot of downstream business, more downstream business in Europe five, six years ago, you know, that went into our elastomers business, TPU, went into our system houses. We had more system houses there than we did any other place. And we also had lower chlorine and caustic prices. And our auto business in Europe used to be one of the most profitable segments we had anywhere in the world. Today, that auto segment that's most profitable is in China. Again, I think we still have a very good auto segment in Europe and a very good one in the U.S., but we're seeing the same trends that a lot of other companies are seeing. Thank you.

Thank you. Next question is coming from Matthew Blair from TPH. Your line is now live.

Great. Thank you, and good morning. Peter, could you talk about your expectations for global MDI capacity growth in 2026? I think there's reports that one of your U.S. competitors is looking to add capacity this year. I think that would raise global capacity by roughly 2%. Do you agree with that? Is that something you're seeing as well? And do you expect any material increases in Asia MDI capacity this year?

Thank you. Well, Asia, I'll hit that first. Asia continues to be our most profitable MDI market and supposedly the one that's most oversupplied with MDI. There was a lot of talk earlier in 25 that with the tariffs going up in the US that a lot of that Asian material that was going into the US had merely washed back into Europe and into China and flood those markets. We have not seen that take place. So as I look at capacity additions in China, I think that they may well be coming on, but I question how much impact they're going to have. And we're not seeing that material necessarily leaving China any more than it has over the last couple of years. In the U.S., Yes, I think we are seeing the impact of some of that incremental de-bottleneck, some of that expansion that's been taking place over the last couple of years with one of our competitors here. I would remind you that typically companies go out about six to 12 months before capacity comes into the market, and you start seeing you start cutting deals. You start talking to people about pricing and what you don't do is bring up a new line of 50,000 metric tons, for example, and all of a sudden tell your sales and marketing, we'll go sell it now that we're producing it. And so the impact of that volume coming into the market which from what I've publicly read is sometime middle part of this year. I would say from a pricing point of view, from a supply point of view, is probably being felt in the fourth quarter of this last year and first quarter of this year. Having said that, we are talking about an expansion of about, what, low to mid single digits in North America of actual capacity that's coming in. So I'm not sure that it's going to have a material adverse change to the market.

Great. Thank you. And then is there any major turnaround activity we should be on the lookout for later in the year for Huntsman, like any sort of MDI downtime in Q2 or Q3 that we should be aware of?

No, just our normal turnaround activity. We had the once-in-four-year major Rotterdam turnaround last year, but normal turnaround activity across all three regions. We do have to make sure that our plants remain reliable, so there will be periods of planned outages, but nothing abnormal.

Thank you. Next question. Today's coming from Laurent Alexander from Jefferies. Your line is now live.

Hi, this is Dan Rizwan for Lawrence. I have a question just based upon something you mentioned before about kind of focusing on widebodies within aerospace. I was wondering if getting into narrowbodies is a focus, how it's done, what the sales cycle is like, or if that's an opportunity in the coming year and years.

Well, it won't be an opportunity until they start redesigning the 737 and the 320 Airbus. And when I say redesigning, that would be a major, major overhaul. by now making carbon fiber wings and infused lodges and so forth. So I don't see that happening any time in the foreseeable future. Again, I think you're going to see opportunities to have new adhesions and so forth applications going into the narrow body. And planes incrementally move towards light weighting and so forth. So that's an area of focus that we continue to have is how do we have greater penetration into the narrow bodies. But as far as all of a sudden they start making, you know, composite wings or fuselages, love to see it, but that would be a major change to the design of the plane. All right.

Thank you very much. Thank you. Next question is coming from Frank Mitch from Fermion Research Alliance. Now live.

Good morning. Peter, I never thought I'd hear you say the F word, let alone on a conference call.

It was quite revealing to say it in Europe, of all places, too, where I think I may have been thrown in jail.

And for the record, if anybody dialed in late, he said fracking. So just to clarify that. Speaking of clarifications, Peter, you know, let me come back to the consolidation question that was asked by a couple other people. I mean, earlier this earnings season, we had a company overtly state that it was, you know, that was open for selling the company. And you obviously said, hey, look, we're willing to engage with interested party and create value where there's an opportunity to do so. You know, is there any, should we be reading through the lines on on Huntsman here in that regard? Or, you know, how would you address that?

No, I would look, the standard answer that we give on something like that is we don't comment on rumors or M&A activity. In this case, I would say that it's, no, we're not in a sale process today or anything of that sort. I think that as we look at it, we see and you hear a lot of companies that are talking about that they're studying the future of their Division X or they're looking at consolidations or they're looking to shut down assets and so forth. And wherever you see chaos, usually you see opportunities. So wouldn't read more to it than that.

Terrific. Thank you so much.

Thank you. Next question today is coming from Jeff Sikorskas from JP Morgan. Your line is now live.

Thanks very much. In the first quarter, your polyurethanes range, first quarter of 26 is 25 to 40 million in EBITDA. And last year you made 42. So is the reason why your urethanes EBITDA should be down is that prices are lower year over year? And in that I would expect that volumes would be higher. And why is the range so big? And what's the difference between the lower end of the range and the higher end of the range? Do you need to get prices up in the first quarter? What's the real dynamic there?

Well, we do need to get prices up in the first quarter. We've got rising natural gas costs in the first quarter. that right now, as I sit here right now, represent about a $10 million headwind that we weren't anticipating a couple of weeks ago in our polyurethane business. So, yeah, I do see some headwinds. I do see that coming down. I would remind you that as we look at the first quarter of last year's 42, that was coming off of a fourth quarter. I don't want to get into too much detail here. That was coming off of a fourth quarter of in 2024-50 and leading to a second quarter of 31 of this last year. So we were seeing a polyurethane businesses last year that was in a nosedive, if I could put it mildly. and I look at polyurethanes this year, I certainly have more optimism in the market. We are starting it from a low basis, obviously, in the fourth quarter, going into the first quarter. I do hope that we're able to do better than that median range and that adjustment, the range that we gave literally. We argued about that just over the last couple of days internally because of the headwinds that we're seeing and And as we look at natural gas prices this very week in Europe are starting to come down. So, again, this is something that if we were to have this call two weeks from now, it could be, you know, maybe a few million dollars difference one way or the other. But I think directionally, we're seeing volumes coming up. We're pushing prices. And I would say that the business is heading certainly in a different direction in 26 than it was in 25.

And when you look at polyurethane prices for Huntsman, did they sequentially move lower through the course of 2025? And then for Phil, is your base case that working capital is a use in 2026?

Yes, I'll let Phil answer on the working capital. In 2025, yes, we did see pricing pressure on a downward basis in all three regions. Pricing actually came down in Europe and the U.S. about the same. It started higher in America. It's still higher in the Americas today, but both came down about the same amount throughout 2025, and Asia less so.

Jeff, on working capital, if we didn't do anything, can you assume that economic conditions are better at the end of 2026 and they were at 25, therefore you've got more revenues, more receivables, you'd expect a use. We have a number of programs in each of the individual items of working capital, inventory, AR, AP, and I fully expect and target that our cash conversion cycle, which we reduced by 10% in 25, will again be a reduction in 2026. And therefore, we would be targeting overall an inflow absent significant changes to the macroeconomic environment.

Thank you. Next question is coming from from Olympic Global. Your line is now live.

Morning, Peter. Peter, you know, a couple of quarters ago, I believe it was Q1 of 25. Actually, maybe it was Q2. You mentioned that sequentially in polyurethanes, you know, you guys see a 8% to 10% volume uptick. And you only saw a 3% volume uptick in Q2 last year. So obviously, you know, I mean, Liberation Day, you know, tepid demand globally, presumably all those factors. went into that, but as you look at Q2 of this year, particularly keeping in mind some of the lean inventory comments you made, could we be gearing up for a pretty, pretty big sort of volume uptake within polyurethanes?

It all depends on the macro issues around the construction season, and we'll certainly know that by the end of March. I would, in my opinion, it's mostly going to be around construction. And that will lead to construction demand, also lead to increased, usually increased durable goods in North America. And that's where we had our biggest miss this last year. So again, and at the same time, remember, Hasan, we're also going to be pushing through price increases. And you've got to balance that very carefully as to how much do you want to increase prices and push for price increases and hold the line on pricing and how much do you want to go after volume. So it's a tough line to walk, and we'll follow the macro economic indicators.

Very helpful. And as a follow-up, I mean, you know, again, it seems that, just from the sounds of it, you seem a little more comfortable about pricing as it pertains in polyurethanes as it pertains to North America, you know, particularly keeping in mind this incremental capacity that's coming online. You know, is it fair to assume that we should see a healthy pricing trajectory in North America despite this capacity coming online, particularly keeping in mind some of the comments you made about how, you know, I mean, you sort of pre-sell ahead of this capacity coming online.

Hassan, you've got to remember, I am my father's son. I grew up in a household where polystyrene was considered to be the greatest petrochemical product ever produced. And so, yes, I'm always going to be pushing for better prices. I'm always going to be optimistic about demand and pricing and so forth. So take what I say with a grain of salt in those areas. I would say that it is simply too early to say in the North American market, and largely to the Chinese market, which you well know that pricing in China is usually going to be the two weeks or so after Chinese New Year's is over, usually you see quite a bit of volatility, hopefully upward pressure on pricing there. North America, it's just too early to tell. Again, we've got pricing announcements that have gone out to our customers, And we're also seeing some pricing announcement and some small bits of traction in Europe on pricing as well. But I don't want to get the wagon ahead of the horses here and say that somehow I'm announcing that we've been successful in getting prices through in Q1. We've made the announcements. They will likely see the impact in Q2, if anything, and we'll continue to push for that.

Thank you. Our next question today is coming from Vincent Andrew from Morgan Stanley. Your line is now live.

Hi, good morning. This is Turner Henrikson for Vincent. What drove the less severe than expected seasonal drop in North American polyurethanes last quarter?

So polyurethanes overall in North America grew significantly slightly, and that's really around some of the business wins that we'd seen in the early part of the year. I don't think there was anything material that we saw in quarter four, which was particularly different. What we saw in polyurethanes in Q4 was that the outage that we'd expected in Rotterdam to last a little bit longer actually was a little shorter, and therefore that provided some upside overall.

In terms of sequentially, you still saw seasonality in North America. What we said in the prepared remarks was December. We were maybe a little bit more aggressive in terms of how we thought there would have been more of a seasonal decline. It was just less, but you still saw the normal seasonality.

Thanks. Thanks. Makes sense. So as a follow-up, we're about a year into significant tariffs having been placed on U.S. MDI imports, and I've seen trade reports that indicate imports of Chinese origin MDI have dropped something like 80%. Could you speak to how you've seen tariffs play out in terms of regional demand dynamics?

Yeah, we've seen those same numbers, the public data on Asian imports, That doesn't mean that Asian players are not bringing product in from Europe, but that poses a number of questions in and of itself on the economics behind something like that. I am surprised this past year to see the amount of product that is coming in from Europe, particularly around smaller sites that I wouldn't consider to be very competitive, but what do I know? I mentioned earlier, again, this is just, I'm not speaking on behalf of the company. It's my own thoughts. I mentioned earlier about a rebound that can suddenly happen. And as I look in the North American market, If you see a rebound in housing, and I'm not talking about a historical recovery in housing, but if you see a usual, maybe a little bit better than usual, certainly better than last year, rebound in housing with the constraints that have been put into place by tariffs and just by the macroeconomics. Tariffs aren't the only thing that discourage trade as well. I could see a scenario where you could see the US running into supply issues before other areas of the world. Again, I want to be very clear. I'm not saying that I'm going to see a rebound here in Q2 or anything. I'm just saying that as you look at that fundamental basis where the US used to have a pretty healthy chunk of its production, of its supply side at least, being being satisfied by imports that have been cut off. US, in my opinion, US will probably be the first to feel tightness should that occur.

Thank you. My next question today is coming from Arun Viswanathan from RBC Capital Markets. Your line is now live.

Hey, good morning. This is Adam on for Arun. Thanks for taking our question. You know, maybe if we could zoom out a little bit, be a little hypothetical. What do you think mid-cycle earnings levels for Huntsman could be maybe, you know, through the end of the decade? Because I think your peak earnings was kind of in the $1.5 billion range, maybe mid-teens. Margins this year was $2.75, closer to mid-single margins. Assuming some of those normalized volumes, you're talking about normalized cost inputs, do you think the business could get back to an $800 million or $900 million EBITDA range in that 10% margin? Or do you think some of this is structurally impaired from asset closures and Europe misbehaving?

I think that we still have the production capabilities to generate those sort of EBITDA. A lot of that is going to be, how does Europe land? And Europe for us used to be a third of our EBITDA. And you've got a third of our business today in polyurethanes that's struggling in comparison to the US and Asia. If Europe gets back on its feet from an industrial point of view, and that doesn't mean that it becomes a global leader, but just recovers back to where it was. Yes, I would hope that we would be able to get back to those numbers. We still have the same amount of tonnage of MDI that's being produced around the world. We have the same fundamental capacity to produce production in our means and in our performance products and our advanced materials. We've taken out, obviously, a lot of costs, a lot of people. We've taken out some of the downstream system houses and so forth. But that hasn't necessarily eliminated our ability should we see an economic recovery in Europe and should we see the US housing market go back to its normalized levels. Yeah, I would think that we have that opportunity.

OK, that's great. And I know there have been several questions on EMDA pricing in Europe. Have you been able to quantify any of that? Now, what are those price increases that you're aiming at? I know maybe not all of those will flow through. Just curious what you're going for.

In Europe, I would, yeah, I think it's just too early to speculate as to what we're in the process right now negotiating with a number of customers and so forth. I would very much like to see us at least be able to offset our raw material increases that we're seeing. And that's going to be a tug of war through the first quarter.

Thank you. Next question is coming from Aaron Rosenthal from JPMorgan Chase. Your line is now live.

Thank you for the time. This is Elan for Aaron. Can you walk us through the moving pieces on the revolver quarter over quarter? Did you fund on the new RCF to repay the outstanding amount at year end? And if so, what's the balance today? And do you have any plans to term out the balance via new debt? And finally, just curious if you would have any interest in tapping your equity to help shore up the balance sheet?

No on the final comment. So new revolver, as I said, I think we're extremely pleased with the strength of the banking group we've got. We've moved to an $800 million revolver. The way that I look at it overall is we have an $800 million revolver. We extended our... maturity and also the capacity on our securitization program, which now adds up to approximately $300 million. And at year end, we had over $400 million of cash, so overall $1.5 billion. And we were borrowing approximately $500 million across our securitization program and our revolver. So that gives a net amount of approximately $1 billion moving forward. To your question around terming out any of the any of the borrowing. Obviously, we've had that discussion as we've moved through the revolver process. I don't see that as necessary as we sit here today. We've managed to put in place an accordion up to $400 million, which we could tap into as a durable upcycle unfolds over the next 18 to 24 months. And I take a look at the overall capital structure, which I think is pretty much aligned with the portfolio that we that we have. So I think we've come to where we sit today, but we're always looking at our capital structure in light of the extended trough that's occurred in the chemical industry.

Operator, why don't we take one more question? I think we're at the top of the hour, so we'll take one more and then wrap it up.

Certainly. Our final question today is coming from Salvatore Tiano from Bank of America. Your line is now live.

Thank you very much. I just want to go back on... the capacity additions in the U.S. that you were asked about before. Firstly, if I heard correctly, I think there was a mention that it's low to meet single-digit capacity growth in North America. And I just wanted to check with your industry intelligence, essentially, what are you seeing in terms of the actual number? Because at least what we've seen from some trade publishers talks about more of a 20% or more increase in the 1-point-something million-ton market. And secondly, Peter, you mentioned that you saw most of the impact already in Q4. I'm just trying to understand if I were to think like a buyer of MDI and inventories in the supply chain are very limited, as you've said before, how would they be already benefiting from that capacity addition coming mid-year if I cannot restock anymore and I have to wait? Wouldn't theoretically that mean that all the pricing benefits, all the pricing impact will only come when the new capacity comes online because there's no opportunity for a seller, sorry, a buyer to restock further?

Well, okay, so... I'm not trying to avoid an answer to the question, but you're asking me to kind of get into the mind of the person who's bringing on the capacity, which I have the foggiest idea. Just because that capacity is coming on doesn't mean it's all going to come on in one day and it's all going to flood the market in one day. Oftentimes, it takes quarters to be able to integrate and to be able to bring on capacity. And I know in our case, when we've brought on capacities in the past, it sometimes takes you up to a year to sell the product out. You're not going to want to bring on 100,000 tons of new product and somehow sabotage your existing 500,000 tons of product that you've got that you're already selling by cutting costs and so far by cutting prices. So how a certain... competitor or producer will bring on capacity, when they bring it on, what impact they want to have on the market and so forth is all yet to be seen. And my comments were that earlier that I believe as we have seen in the past, with this particular producer. Product is bled into the market, usually on an as-needed basis. They'll obviously will probably be expanding their footprint, but how they do it and how soon they choose to do it and what impact they choose to have on the market, that's kind of out of my, I just simply don't know. But, again, it's very, very rare that you'd all of a sudden see 100,000 tons start up on Wednesday and it floods into the market, and you're going to be seeing that lower margins and lower price immediately. Thank you.

We reach the end of our question and answer session, and that does conclude today's teleconference and webcast. We disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.