Resilient Huntsman benefits from production consistency in Q3

The Woodlands, Texas – Huntsman’s MDI plants in Caojing, China; Geismar, Louisiana; and, Rozenburg, the Netherlands ‘are all operating at capacity and have been for the past quarter or so,’ said Peter Huntsman

Peter Huntsman, speaking in a Q3 conference call on 27 October, added that the Polyurethanes Business Segment had recorded adjusted earnings before taxation, depreciation and amortisation of $ 254 m in the quarter, up 43%. Volumes were up 8% compared to the same period in 2016, he added.

In the Polyurethanes Business Segment, revenue in the third quarter of 2017 was $ 1.2 bn, compared with $ 891 m in the same 2016 quarter, up 34%.

Across the business, now that the Venator, titanium dioxide and additives business has been spun off, the polyurethane segment was a major contributor to revenue, which totalled $2.169 bn in the third quarter of 2017; and EBITDA, which totalled $340m in the quarter

Peter Huntsman suggested that volume growth may slow slightly in the fourth quarter, but that margins would remain robust. This is due to the policy which sees the firm ‘deselect the less stable margin component business in favour of long-term, more stable differentiated MDI systems,' he said.

'These differentiated MDI systems,' he continued, 'saw a 16% year-over-year improvement in volumes globally. Strong ongoing global demand combined with continued tight supply conditions advanced favourable price dynamics in component MDI in both China and Europe.’

Peter Huntsman added that currently, globally operating rates are very tight with global effective operating rates 'above 95% capacity utilisation. Industry demand for MDI is growing at about 6% globally on an annualised basis. We believe industry manufacturing capacity will grow approximately 4% annually from 2016 through 2021.'

He ruled out any short-term greenfield expansions adding we do expect some 'brownfield expansion and debottlenecks including our own, Caojing, China, facility of 240,000 tons of stated capacity.'

Huntsman warned that because there are fewer, larger lines being built 'single plant outages will potentially impact the market, especially when capacity is operating at greater than 90% utilisation.'

In North America, due to the structure of its long-term formula contracts, Huntsman has much less elasticity and movement in margins, therefore much less exposure to upside and downside margin expansion, he said.

The firm saw its  North American volumes increase 10% compared to the 2016 quarter as both commercial and residential construction markets drove demand.

Turning to Europe, he added: 'With our Rotterdam facility, recently expanded by 60,000 kilotons, now running at full rates, our European region volumes increased 8% in the quarter. This high growth was driven by our differentiated adhesives, coatings and elastomers, footwear and insulation systems businesses.'

In Asia he said that volumes rose 5%, driven by demand in the Chinese automotive and insulation markets, but he warned that Huntsman is 'capacity-constrained in this region until our new facility in China comes online. As stated, we expect our Chinese MDI expansion to begin commercial operations in early 2018 with capacity coming online as demand requires.’

Huntsman quotes taken from a seekingalpha transcript.