The Woodlands, Texas -- Adjusted ebitda for Huntsman’s polyurethanes division in the second quarter of 2014 was $197 million, Peter Huntsman, ceo said at an investors conference call.
Huntsman Q2 2014 benefit from MDI tightness
He added: “We saw favourable earnings growth from our MDI urethanes business of $24m, whereas PO/MTBE earnings decreased $1m as a result of a manufacturing disruption at our Fort Neches, Texas facility. This hit EBITDA by about $10m in the quarter,” he said.
Kimo Esplin, chief financial officer said that polyurethanes is Huntsman’s largest division. It made up 33% of revenue in the second quarter and grew 5%. MDI urethanes revenue increased 8% and more than offset the negative impact from the PO/MTBE manufacturing disruption.
Peter Huntsman said demand for MDI is strong. Global sales grew 7% compared to the prior year, with growth in insulation, automotive and adhesives, coatings and footwear businesses. The majority of this growth came from the Asia Pacific region, where all markets grew at double-digit rates.
Peter Huntsman quantified the benefit his firm expects to extract from the new MDI facility in Caojing, China. “When completed in 2017, our offtake from this new capacity will be approximately 200,000 tons and yield approximately $85 million of annual EBITDA at full run rates,” he said.
Peter Huntsman added: “We continue to see strong demand for MDI in China and other Asian markets, as well as our urethanes North American markets.”
Esplin explained that Huntsman was likely to commit $115m to the China MDI project, with the balance funded by partners and non-recourse bank financing.
He said it was likely that some announced global MDI capacity expansions will be delayed, and capacity utilisation rates will be around 90% for the next few years.
Peter Huntsman said that second quarter demand in the Americas was strong and accelerated at the end of the quarter and European demand was stable.
EBITDA for polyurethanes is likely to be around $875m/year in the next few years, Peter Huntsman said. That would mean the business was yielding a 17% margin on sales.
This increased in EBITDA will be driven by tightness in the MDI market, said Peter Huntsman. He suggested that operating rates would stay at around 90% for the next few years. This is because a number of announced expansions are likely to be delayed.
Peter Huntsman said that supply and demand is tight in North America as the construction and auto industries make up for the long winter, and late spring. In China “we’re operating somewhere in the high 80s [%], Europe has been and is pretty flat.”
He said Huntsman wants to move more into formulated systems businesses and move more downstream from raw material so the business is less sensitive to operating rates and raw materials costs.
Huntsman added that his business has been able to pass on raw materials costs caused by the high benzene price. The firm, estimates that if benzene stays at around $5/gal it will continue to add $20m to costs.
