Huntsman Corporation (HUN) Q1 2026 Earnings Call May 1, 2026 10:00 AM EDT
Company Participants
Ivan Marcuse – Vice President of Investor Relations & Corporate Development
Peter Huntsman – Chairman, President & CEO
Philip Lister – Executive VP & CFO
Peter Huntsman Chairman, President & CEO
Ivan, thank you very much. Thank you all for taking the time to join us this morning. Before I begin my remarks about our company and recent events, I want to simply say that I hope there is a quick and peaceful resolution to the ongoing conflict in the Middle East. Over the past 40 years, I’ve had the opportunity to visit every country bordering the Persian Gulf with the exception of Iraq. I have always been treated warmly and fairly by the people I’ve encountered. I hope that my comments do not come across as being callous in any way to the suffering and fear emanating from this region as I address the economic impact of these events to our bottom line and industry.
From the first hours of this conflict, our #1 commercial priority has been to increase prices enough to offset rising costs. I believe we’ve been successful in doing this. This will require continued communications with our customers and suppliers and also the discipline to make sure that we are not a shock absorber between raw material costs and finished product pricing. Our next priority is operating our plants in a reliable manner to make sure that we have the product to meet our demand. Our operations during the first quarter and going into the second quarter have been excellent.
From a sales perspective, we are seeing stronger-than-expected demand going well into the second quarter. I would say that this is being brought about by 3 factors: number one, seasonality as we move into the second quarter and the building season resumes across North America, Europe and Asia. Number two, customers who are buying ahead of the expected price increases that are being announced; and number three, disruptions that have been seen in certain trade flows that have impacted supply. An example of this would be some of our maleic customers in Europe who have become overly dependent on Chinese supply of maleic have seen a disruption in supply as raw materials and shipping costs have increased from that region. These 3 factors are also happening at a time when most inventory levels are very low across many supply chains.
These improved order patterns are being seen as we enter into the second quarter in most of our regions and across many of our products. The obvious countervailing point to all of this is how long does it continue? I can’t see order patterns that go through the month of June, but the guidance that we have shared from each division in Q2 reflects what we’ve seen to date. Today, that visibility is less clear as we look further into the quarter. I struggle to see how inflationary pressures, particularly in areas reliant on imported energy like much of Asia and Europe, will not see an inevitable downward pressure later in the year as consumer spending gradually shifts towards higher prices. To what degree this occurs is yet to be seen.
I am heartened to see the housing starts and durable goods orders in the United States better than expected for the month of March. But I’m also keeping an eye on residential permits, a step that precedes construction starts down 11% for the month of March. There will also be some longer-term dislocation of traditional economics. If you were a producer that enjoyed discounted raw materials coming out of Venezuela, Iran and Russia a few months ago, it is likely that you’re not seeing such discounts today, and I highly doubt you’ll see them in the foreseeable future. Many customers are looking for closer and more secure sources of supply. Supply chains are shifting and being reassessed. I believe that there will be some lasting impact for certain regions and products that may not seem too apparent today. It is simply too early to know how lasting some of these will be.
In short, we are aggressively raising our prices to both cover our cost of our raw materials while also expanding margins from the trough economics that we’ve been experiencing for the past 3 years. We will continue to manage our costs and deliver these objectives on budget. We will be focused on volumes and make sure that spot buying also comes with longer-term volumes and obligations. I’m glad to see the trends that we’re seeing in the second quarter, but we still have a ways to go to get to our normalized margin levels. This will require stable and longer-term demand trends to continue. I feel that we are in a strong position today to capitalize on such changes going forward. Thank you. Operator, with that, we’ll turn — open the time up for Q&A.
Patrick Cunningham Citigroup Inc., Research Division
In the release, you talked about the potential for a more durable return to mid-cycle profitability. This likely depends on both supply and demand side at this point. But can you give us the latest view on what this crisis may do in terms of supply side rationalization for MDI and polyurethanes? How do you see this playing out in terms of structural energy cost pressure, feedstock availability or potential closures at this point?
Peter Huntsman Chairman, President & CEO
I don’t see a great deal of structural change as we look at MDI. I do see pressures continuing in Europe. If you’re a European producer now having to put up with natural gas that’s priced somewhere in the mid-teens versus where we are today, I noticed in the Houston Ship channel Price this morning was under $2 per MMBtu. These are real material gaps in shifts. I can’t help but think that there’s going to be continued pressure on petrochemical producers across the board and in MDI across Europe.
But having said that, I also think that there are probably some structural issues that may make Chinese exports in certain products. I won’t get into exactly which products those are, but I think that they’re varied across the board. if you’re relying on coal as a raw material in China, you’re probably doing quite well. If you’re integrated into a world-scale refinery and integrated system in China, you’re probably doing quite well. If you’re part of what they call the teapot collection of refineries integrated into export-bound chemical facilities, you may be under some cost pressures as you see some of the discounted crude products.
So it’s not just what we see from a competitive point of view. It’s also what we see from the raw material that many of our customers and many of our competitors and the industry in general will be facing. And I think those are some of the longer-term issues that we’ll be dealing with even after the Strait of Hormuz hopefully open soon here.
Kevin McCarthy Vertical Research Partners, LLC
Peter, can you speak to operating rates in MDI, both for Huntsman and also what you’re observing at the industry level? And related to that, how are things changing post-war versus pre-war?
Peter Huntsman Chairman, President & CEO
I think that as we look at the industry in general, you’re probably looking at the low to mid-80s. And I think now from where we are, we would be in the high 80s. We’re sold out completely in our Chinese operation. Our U.S. operation for the most part is sold out. Europe, as we said in the — when we announced our first quarter earnings before the Middle East conflict, we’re starting to see some green shoots there. We continue to see some opportunities in Europe. And I would say that we’re operating at pretty good levels across the board.
There have been a number of outages and I would say, short term and also planned disruptions in the industry, not to be too unexpected. When you go have an industry that’s been operating kind of at a low probably 70%, 80% for the last couple of years. And now all of a sudden, you see an increase in demand and pull-through, you typically have operating issues. So I can’t speak about the competition, but I can just say in our facilities, all 3 of our MDI facilities, our associates there have done a fantastic job in their operations.
Kevin McCarthy Vertical Research Partners, LLC
And then secondly, I imagine your PO/MTBE joint venture in China has become more profitable. Maybe you can talk about what you might expect for equity earnings trajectory moving forward.
Peter Huntsman Chairman, President & CEO
Yes. Certainly, in the past, it’s been a little bit of a drag on us. I think today, we’re probably in the low to mid-single-digit millions of dollars of impact on that business. So certainly doing better than it has been in the past. And I would hope that MTBE, that C-Factors should improve as you get more into the driving season, but that’s — there’s just so much volatility right now in the whole refining chain and what’s going on with PO economics. That would be probably be one of the murkier businesses that we have as far as looking into the future.
Philip Lister Executive VP & CFO
Remember, Kevin, the price of gasoline is managed differently in China than elsewhere in the world. So MTBE margins aren’t what you would expect in China, where the Chinese joint venture is making money today is on propylene oxide and the margins that we’re seeing there over and above propylene.
Frank Mitsch Fermium Research, LLC
That’s interesting. So PO is doing better than MTBE in China. Thanks for that enlightenment. Peter, I was wondering if you could speak to the polyurethane and MDI pricing initiatives that are underway, how that relates to underlying benzene costs and what sort of successes are you seeing or not on that front?
Peter Huntsman Chairman, President & CEO
Well, I’d say that we’re seeing a — we’re certainly staying ahead of the benzene curve never as far ahead as I would like to see it. I’d like to see it multiple times better than what we’re seeing. But I highly compliment our sales and marketing groups on their aggressiveness and making sure that we’re covering our raw material costs and staying ahead of that. So yes, both from a volumetric basis, we’ll see a positive influence on it and also margin expansion above and beyond raw materials, we should see expansion on that.
Frank Mitsch Fermium Research, LLC
All right. Terrific. So margin expansion. So if I think about the price/mix for Huntsman overall, it’s been negative for several quarters here. Given these initiatives that you have underway, is the expectation for the full company to show positive price/mix here in 2Q and hopefully beyond?
Peter Huntsman Chairman, President & CEO
Certainly, in Q2, hopefully, beyond, I would reinforce that as well. I mean, as I look at some of the pricing trends that we’re seeing going into the second quarter, just to give you an idea in North America, I’m talking about all products, all prices. So I’m not talking about any one division, but we have not seen a quarter-on-quarter growth in pricing trends. I mean unfortunately, you’re right in what you said earlier. We haven’t seen that since 2022. So the trends that we’re seeing right now and the jump that we’re seeing on a quarterly basis right now in North America, we haven’t seen that in years now. Europe isn’t too dissimilar.
We’ve seen a few quarters here and there where we’ve seen some up pricing, but that’s more to do because of the strength of our Advanced Materials business in Europe, not because of the macro trends there. So yes, I like where we’re going into the second quarter. And my only question is how sustainable is it? But it’s — look, it’s a lot better than where we were a quarter ago.
Hassan Ahmed Alembic Global Advisors
Peter, I just wanted to revisit some of the earlier commentary around MDI supply, both as it pertains to the product as well as the feedstock. I mean there’s at least one facility in Saudi Arabia that seems to be offline. And then obviously, I would imagine there would be sort of broader issues in terms of the availability and pricing of benzene as well as methanol. So could you comment a bit about sort of operating rates for MDI, keeping in mind some of these outages as well as some of the feedstock availability issues the world may be encountering and how long it may take for some of these bottlenecks, if peace was declared tomorrow to sort of be ironed out of the system?
Peter Huntsman Chairman, President & CEO
Yes. I think that as we look, you made reference to a Middle East producer. That’s roughly about 4% of global capacity. So if you kind of think that the industry is operating in the low to mid-80s, that would say that we’re kind of pushing the mid- to upper 80s at 90% capacity utilization globally. Now again, that’s not across the board. There’ll be parts that are better than that and parts that are worse than that. But just globally, across the board, when you reach 90% in the MDI industry, given what people have a stated capacity and the outages that take place on a yearly basis for maintenance and so forth, you’re really in an industry that starts to strain at 90-plus percent capacity.
So I mean, statistically on paper, you can see where the industry is now moving into the upper 80s. In some region of the world, it’s going to be, again, better and worse. I’ve not seen or heard of any problems with the procurement of raw materials in MDI around the world. And the pricing of that raw material so far has been pretty much in line with oil. So that would tell me that there’s a pretty decent supply of it that’s available. But — longer term, my biggest question on MDI is going to be the sustainability of the demand because, again, previous to February 28, I would say that — I don’t want to say that we were going great guns.
So we’re starting to see some green shoots in Europe as we reported earlier. We are moving into the North American housing season. And China was stable and in pretty decent shape. So my whole question is really around sustainability of demand as you start looking out in the third and fourth quarter. And like I said, Hassan, it’s just too early to start looking at those order trends.
Hassan Ahmed Alembic Global Advisors
Understood. And as a follow-up, you mentioned the polyurethane market in Europe, obviously, was volumes-wise up 4%, which obviously is decent. But in your prepared remarks, you obviously talked about easier compares as well because last year, you obviously had the sort of Rotterdam sort of turnaround. What green shoots are you guys seeing volumes-wise in Europe? And over the last couple of quarters, obviously, along EBITDA lines, it seems for the PU business, EBITDA was negative. Have you guys currently sort of turned that around? Is it actually generating positive EBITDA now?
Peter Huntsman Chairman, President & CEO
Yes. To look at your first area, I would think that CWP composite wood products in Europe is looking pretty good. Technical insulation is — and that would be your sandwich boards and so forth that are going into data centers, warehouses, prefabricated buildings and so forth. Your ACE business, adhesions, coatings, elastomers business is doing. Again, I don’t want to paint the details of going through the roof in Europe, but we’re seeing some green shoots in these areas, badly needed, by the way. And so yes, I think that certainly is moving towards an area where we don’t just want to see a positive EBITDA coming from Europe, but we want to see positive cash coming out of Europe. And so yes, we’re at that precipice and seeing things improve.
Philip Lister Executive VP & CFO
And Hassan, as we sit here today, we would expect Europe to be positive from an EBITDA perspective.
Michael Sison Wells Fargo Securities, LLC, Research Division
When I take a look at your outlook for Polyurethanes for 2Q, margins look like they’re going to improve a little bit, but not a lot. So what do you think needs to happen to get the EBITDA margins for polyurethanes at better levels going forward? And just curious what the pricing for the segment should imply for 2Q year-over-year?
Peter Huntsman Chairman, President & CEO
I think the 2 things that we need more than anything else are demand and raw material stability. We’re projecting in the second quarter that we’ll take in well in excess of around $100 million of raw material costs, and we expect to offset that and get prices higher than that. But that’s a tremendous amount of raw material costs that we’re absorbing in one quarter. And of course, in order to have any sustainability in pricing and pull-through pricing, we’ve got to see the demand. So I did note in my prepared remarks, a cautionary note on inflation and what inflation factors may play in Europe. But there’s also — I’d say on one hand, there’s those inflation factors that give me concern. On the other hand, Europe has been so lethargic for so long.
I can’t help but think that there is pent-up demand, whether it be in housing or remodeling and just industrial demand, defense rebuild and so forth across the board. So that’s going to be for the second half of the year, the single biggest variable in my opinion, is going to be demand.
Vincent Andrews Morgan Stanley, Research Division
Just want to try to piece together a couple of the comments you made, Peter, as it relates to polyurethanes. And if I’m conflating things, please obviously correct me. But you’re talking about how you’ve been able to get pricing ahead of benzene, and we traditionally think of you having about a 2-month lag of benzene flowing through. And then maybe later in the year, we may see some negative demand elasticity from the consumer at the end market working its way back up the supply chain. So do we think about 2Q, your spreads being strong because you’re ahead of that benzene and then maybe benzene catches up with you in 3Q, and then we have to see how much more pricing you can get and that, I guess, would be a function of demand. So are we thinking 2Q and 3Q may be flattish in terms of profitability in polyurethanes? Or do you think 3Q could actually be up a little bit or maybe it would be down a little bit? What’s your latest thinking on that?
Peter Huntsman Chairman, President & CEO
Well, far too early to comment on Q3. Again, I believe Q3 is going to be more demand-driven than anything else. I do — the trends that I’m seeing today, we are staying ahead of the price on benzene. We also are picking up some volume that we see on a year-to-year sort of growth basis. And we’re going to continue to be pushing prices through. Now again, the ability to push those prices through will be predicated on macro demand and so forth. And as I get into the third quarter, and again, I don’t want to be overly pessimistic about that. I merely say that is right now, there’s — I feel there’s a bit of euphoria in the industry, and I love seeing it. I think it was long overdue. I hope it continues into the third and fourth quarter, but a lot of that is just too early to tell on demand.
Matthew Blair Tudor, Pickering, Holt & Co. Securities, LLC, Research Division
I was hoping you could talk a little bit more about just underlying construction activity. One of your peers mentioned that it has been weakening. You talked about the diversion in March data between starts and permits. Are there any trends in Q2 on construction activity that you can share so far?
Peter Huntsman Chairman, President & CEO
I would say that we’re not seeing a drop-off, but we’re also not seeing a lot of improvement. And I think that I would say right now, it certainly isn’t shaping to be a bad season for us. It’s just not a lot of growth in that. So I’d say, yes, there’s some stability. But I’m sorry, I probably should be saying it’s either going up or it’s going down, but it seems to be quite stable at the present time. That’s why I say there’s some decent trends on housing starts that feel pretty good. And we’re — I think in the second quarter going into the third quarter, we’ll probably see 2%, 3% low single-digit growth in construction this year. But I’m also concerned when you see a 10% drop in 1 month in housing residential permits. Again, that’s a step before the housing starts. So again, I don’t want to get — I don’t want to read too much into a single quarter of data because February, both of those numbers were the complete opposite. Permits were up and starts were down. So I think we’ll probably see some very gradual growth this year.
Matthew Blair Tudor, Pickering, Holt & Co. Securities, LLC, Research Division
Sounds good. And then I was also intrigued by your comment that you’re seeing some customers that are buying ahead of expected price increases. Is this occurring in some products more than others? And if so, which products? And then also on a regional basis, would this be something that’s more prevalent in Europe relative to the Americas?
Peter Huntsman Chairman, President & CEO
Yes. I would say that as we look at it, you’re probably talking about 2, 3 days of — on MDI. That would be the area where we probably see the most prebuying. So I’m going to just say that there’s — I wouldn’t say that there’s a big wave of capacity that is being pulled through. I think that we’re managing that very carefully as well. So customers coming in and increasing their orders from where they were just a few weeks ago, we’re discouraging that and making sure that we kind of keep an equilibrium on orders and so forth. And in other areas where people are coming in that haven’t bought from us for some time on a spot basis, we’re seeing if we can’t extend contracts from what you need over the next month or 2 to what you need over the next year or so. Some of our Performance Products customers and so forth that may have shifted supplies to China out from Europe and the U.S., for example.
So yes, I think on both of these demand trends, we need to make sure on those that are — there’s a difference between those that are spot buying, panic buying and those that are just trying to buy ahead of a price increase. They all need to be managed a little bit different. Sorry, there’s not one size that fits all. But right now, if there is pre-buying that’s taking place, I would be very worried if we were seeing what would be the equivalent of a week or 2 or 3 of prebuying taking place. I would say right now, we’re seeing low number of days. of inventory that is prebuying at this point.
Jeffrey Zekauskas JPMorgan Chase & Co, Research Division
Can you comment on how much Chinese MDI is coming into Europe?
Peter Huntsman Chairman, President & CEO
It hasn’t been all that much. I wouldn’t say that it’s anything out of the ordinary. It’s been pretty stable with where it’s been the last couple of quarters. And so it’s — I would say, if anything, maybe it’s even a little bit slightly lower than what it’s averaged over the last year or so. So nothing that would be — nothing that would have a material impact on the industry or pricing there.
Michael Harrison Seaport Research Partners
Peter, you mentioned in the prepared remarks there that we’re still meaningfully below mid-cycle margins in the Polyurethanes business. And I was wondering if you can provide any kind of an updated view on where you think mid-cycle margins could be. I’ll hold off on asking you when you think you can get there. But what is the appropriate mid-cycle margin level for Polyurethanes?
Peter Huntsman Chairman, President & CEO
Well, I think that we’re probably — I’ve always thought of it more on what is it on an EBITDA on average basis. And I think that business on average ought to be a mid-teen sort of a business. And how soon do I expect that to happen as soon as possible. Sorry, guys. Yes, it’s long overdue.
Joshua Spector UBS Investment Bank, Research Division
I wanted to see if I could just follow up on kind of the benzene MDI math in 2Q here. Just trying to think about if we say volumes are stable into 3Q, you’re pricing ahead of raws in 2Q, is that a headwind in that your raws are going to catch up a bit more from inventory in 3Q? Or are you exiting with enough price where you’d say that earnings in polyurethanes would be stable sequentially in that scenario?
Peter Huntsman Chairman, President & CEO
Yes. I would say that we are exiting Q2 able to stay ahead of the raw materials that we see going into Q3. And we’re also working towards more price increases to come in that area. So — I mean, as I sit here today, looking at unless there’s a cataclysmic change economically, we will stay ahead of our raw material costs going into Q3.
Philip Lister Executive VP & CFO
Josh, benzene just settled at [indiscernible]. The point is we’re ahead of that, and we’ll stay ahead of it.
Laurence Alexander Jefferies LLC, Research Division
But I guess I appreciate that no one wants the customers to build up inventory, but is it unusual for — with this kind of spike where several companies are out publicly talking about imminent shortages in different molecules that people who may see higher prices in the future aren’t trying to pull forward orders? Is that unusual?
Peter Huntsman Chairman, President & CEO
No, I don’t think that’s unusual at all. I don’t think that we’re at a point — I mean, I’m not saying I don’t wish we were, but I don’t think we’re at a point in MDI at this time where we’re seeing shortages and people saying, I can’t get it. I think that there are people that are concerned as they look at their supplier — with their suppliers with announced turnarounds that have been scheduled for multiple years that are taking place and so forth. Some of the disruptions that you’re seeing in some of the energy flows and shipping flows — but I’m not seeing panic buying at this point, but I am seeing higher capacity utilization. So I think that there’s an improvement in market conditions for the producers, but consumers can still get the product.
Arun Viswanathan RBC Capital Markets, Research Division
I guess we did hear about an outage with Wanhua a couple of days ago. And maybe I can just get your thoughts on that, if you think that, that could tighten up markets. And then I guess maybe you were asked this question earlier, apologies if so. But what is kind of the potential for those utilization rates to remain consistently above 90%? Do you see any permanent kind of supply activities that could arise in the next few months? Obviously, it depends on duration, but — of the conflict. But what are your — are your customers kind of migrating to you in the face of other supply shocks or disruptions? Is there a share gain opportunity as well?
Peter Huntsman Chairman, President & CEO
Yes. Arun, good question. I’m not sure necessarily what’s happened with the competitor facility. When they do have multiyear closures, when I say multiyear, I mean, oftentimes, when you do a large-scale closure on a vast petrochemical site, you’re renting equipment, you’re planning equipment, you’re planning workforces usually 18, 24 months in advance. I mean you know these things are coming and people are exchanging materials. I know that’s happening. I’ve heard — read that a splitter may have gone down or something. I’ve not read that a facility, there’s been a large-scale cataclysmic outage or anything like that.
I think that we’re probably as an industry operating in the high 80s right now, depending on product flow in the Middle East. That’s going to be a bit volatile right now with some of these large — remember in China, you’ve got single site facilities of 1 million metric ton sites. When those go down, a site that big, you will fill it globally. And if they’re down for an extra couple of weeks because of a problem or whatever, you’ll feel it acutely on a short-term basis. So we’ll continue to take — I think as we look right now, our facilities are operating well, and we’re in a position where we can be a strong and reliable supplier.
Arun Viswanathan RBC Capital Markets, Research Division
Okay. And then the other question I had was just on the PO market. Obviously, there’s some tightness there, but there was also a reduction of capacity by one of the suppliers recently, and I know one of the other plants are down. So are you guys feeling like your own kind of procurement for the Polyurethanes business is intact? Or do you foresee any supply disruptions or rerouting of your supply chain that would be required?
Peter Huntsman Chairman, President & CEO
No, we don’t see any disruption in our PO supply right now. We’ve got a good supplier that’s plant operating, and I feel that we’re covered with that. And we’ve also got an excellent supply source in China as well. So I feel we’re okay with that. Operator, why don’t we take one more question, and we’ll let people get on their way.
