The Woodlands, Texas - Huntsman Polyurethanes has reported sales of $695 million in the second quarter of 2009 (Q2), down from $1161 million for the same period last year, the company said 6 Aug.
Half-year sales in the polyurethanes unit were down from $2163 million in Q2 2008 to $1295 million and earnings declined from $148 million in Q2 2008 to $86 million. Average selling prices and sales volumes for polyurethanes were both down by 27 percent and 18 percent respectively, compared to the same period last year.
The drop in revenue in Q2 was primarily due to lower MDI (methylene diphenyl diisocyanate) sales volumes, caused by weaker demand in Europe and the Americas, Huntsman said, adding that overall lower average sales prices were caused by "competitive pressures," lower raw material costs and the strength of the US dollar against the Euro.
Discussing the results in a 6 August conference call with analysts, Huntsman president and ceo Peter Huntsman said that plant operating rates [in the US and Europe] were about 66 percent during Q2, similar to those in the rest of the industry. Meanwhile, "in Asia we were operating in the high 90-percent [range]. We were essentially sold out in Asia," with strong demand from automotive, and in infrastructure for insulation, he pointed out.
Huntsman saw a pick-up in business in North America, throughout Q2, due in part to a focus on spray foam applications for rehabilitating older buildings, the Huntsman president added. And in Europe, the group saw some increase in the insulation market, so capacity utilisation rates improved through the quarter, he added.
Regionally, year-on-year, quarterly MDI volumes were up about 5 percent in Asia, down about 20 percent in Europe and down 30 percent in the Americas, said Kimo Esplin, Huntsman's executive vice president and chief financial officer. He added that, compared with Q1 2009, demand rose in Asia by 55 percent, in Europe by 10 percent, and in America by 17 percent. "So sequentially we're seeing some good strength particularly in Asia that's not surprised anyone," Esplin said.
Peter Huntsman said that, specifically in polyurethanes, in Q2 Huntsman's sales volumes increased by 14 percent over the first quarter. So "while we are down 18 percent" over Q2 2008, "we are encouraged by many of the signs we are seeing around the world."
Huntsman has had to be "diligent in our efforts to manage fixed costs within this business, without sacrificing service to our customers and longer-term growth," by reducing inventories and rationalising operating rates to align to customer demand, he commented.
To achieve this, certain production lines have been idled and others are operating at reduced rates, Huntsman said.
He added that the group believes its MDI plants in North America, Europe and China are among the most cost-efficient in the world, which he feels will be a benefit as global economies improve and return to strong demand for MDI-based polyurethanes products.
In terms of polyurethanes, "we like the whole MDI business and the systems businesses," which Huntsman sees as very differentiated - "even when we are selling MDI directly and not in a system."
On the propylene oxide side, that goes into polyols and ultimately systems, but the PO co-product MTBE is clearly a commodity. PO/MTBE sales in the second quarter were roughly $172 million.
In polyurethanes Peter Huntsman said he thinks the division "did a very effective job in the last two years or so, in winning business. "We really set our focus on two or three major applications," and some sub-set uses which were expanding in Asia and so forth, and as a result, Huntsman "will continue to see our polyurethanes business grow faster than our peers."
Discussing where MDI is used, Peter Huntsman said, "A lot of these products go to mills," to build OSB (oriented strand board), which are based around the company's formulated MDI binders. Often Huntsman's materials will have been used since start-up, so that board production is designed around them. So it's not just a matter of shifting from Huntsman's product to the cheapest product, the mills are looking for a supplier with the most consistent product that fits into its process, with the best service and technical back up.
And in formulated insulation grades, Huntsman said "I think that we are unique ... the best in the industry in servicing those applications."
Huntsman Corp. reported overall sales revenue for the company was down by 36 percent to $1866 million in Q2, although this was a rise of 10 percent compared to Q1 2009 sales revenue. Earnings from continuing operations were down to $96 million from $210 million in the same period last year.
On 22 June 2009, Huntsman reached an agreement with Credit Suisse and Deutsche Bank to settle claims of tortious interference concerning its terminated merger agreements with Basell and Hexion Specialty Chemicals Inc.
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