Huntsman Corporation (HUN) Q2 2026 Earnings Call July 31, 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, and thank you, everybody, for taking the time to join us this morning. It’s been 3 months since the last time we were able to report on market conditions and what we were doing as a company to enhance shareholder value. Needless to say, it has been a rather busy few months on a number of fronts. I’d like to comment on a few things, but I plan to be brief as your questions and comments are the reason for this call.
I stated during our last quarter’s call that while I was heartened to see the prices and margins were improving across most of our product lines, I emphasize the need for “stable and long-term demand trends to continue”. While we improved our margins from the first quarter, I remain concerned as to the growth rates and consumer confidence that we are seeing.
Since our last call, North American housing stats have softened and Chinese consumer confidence continues to languish. Europe continues its ill-fated energy policy and all that free wind is now costing European consumers and industry near-record amounts. As ongoing conflicts in the Middle East seemingly move weekly from a ceased fire to all-out war, moving energy prices, stock markets and consumer sentiment with each action, we continue to keep a wary eye on inflation and consumer spending, especially on durable goods. It seems much of this turbulence will continue through the third quarter.
While this is playing havoc on costs and order patterns, it is also demonstrating the value of reliable supply lines contractual assurance of supply and the value of pricing and consistent quality. We will continue to push for greater margins as we believe that this industry still has a lot of room for improvement.
In the — on the 16th of June, we announced a merger of equals with Olin Corporation. Since that time, we’ve had the opportunity to visit one-on-one with the majority of our largest shareholders. If I had to summarize my feelings towards this transaction, it would be in the answer that I shared when I was asked if I could do anything different than what had been done. My response was that I wish I had met Ken Lane a year earlier and that we were here today earning materially more than we otherwise would be earning. Regardless of market conditions, whether they improve or continue to languish, our company and shareholders will be better off with this proposed merger. If this transaction was a year behind us, we would be today, well on our way to achieving an additional $300 million in synergies.
We would be earning more through newfound commercial opportunities that are not even part of our $300 million in synergies. We would have a stronger balance sheet that would be improving quarter-by-quarter. In short, should today’s market conditions continue through next year, we will be better off than we are today. Should markets improve, we will be the benefactors of not only the forthcoming synergies, but also higher combined volumes and greater integration.
Either way, this positions us to improve regardless of market conditions. I have been impressed with the strong collaboration and interaction between the Huntsman and Olin teams that are advancing our closing at a rapid pace. Our teams will be ready on day one of closing to commence with achieving our outlined synergies. Between now and closing, we will continue to focus on creating as much shareholder value as possible. Following the completion of this transaction, we’ll be able to achieve far more.
Frank Mitsch Fermium Research, LLC
I was wondering if you could update us on the state of the MDI business from a demand and a supply standpoint, particularly on the supply side, given what’s been going on with the Iranian conflict. How do you see that — how did you see that impact 2Q? What are your expectations for 3Q and beyond?
Peter Huntsman Chairman, President & CEO
Well, I think on 2Q, we had the ability to be able to put prices up. Much of that was to recover the increase of raw materials that we were seeing at the time, but we were also able to get ahead as our results indicate that we’ve nearly doubled our EBITDA since second quarter of last year. Look, on a supply basis, we obviously have a large global MDI plant that is on the wrong side of the Strait of Hormuz, I would say. And that is probably representing somewhere around 4% of industry average.
So from a supply point of view, Frank, I think that it’s pretty well balanced. My disappointment, if I have one, is that we’re not seeing greater demand and greater improvement in the macroeconomic situation. I don’t want to be overly dire on this. I’m just saying that yes, on the supply side, I think it’s pretty well balanced. On the demand side, I’d like to see a little bit more. Right now, depending on where you are around the world, you’re probably seeing anywhere from 0% to 2% very low single-digit sort of growth that is taking place. So an improved economy, improved housing demand, particularly in North America would be very helpful, return consumer confidence in Asia would be very good to see. And frankly, improved sentiment — consumer sentiment and lower energy inflation in Europe, I think would all be benefactors this time.
Hassan Ahmed Alembic Global Advisors
First question on polyurethanes. Obviously, a lot of stuff moving around. I mean we’ve seen some TDI outages. I would imagine that may result in some incremental demand on the MDI side of it, then we’ve obviously seen some outages in MDI itself. So just in terms of effective utilization rates, where do you see the industry and should it be relatively snug over the next quarter or 2? And part and parcel with that, I know you guys have taken some pricing actions in Europe in particular. But obviously, nat gas prices, they continue to rise. So I mean, will you guys be EBITDA positive over there after the price actions? And will the industry over there be EBITDA positive as well.
Peter Huntsman Chairman, President & CEO
Well, if I had — Hassan, thanks very much. Good question. If I had to look at the market today in the snapshot, I would say that, yes, Europe with the pricing actions and with the cost structure that we have, Europe should be positive as we look into the third quarter. Now again, over the last couple of weeks here, and I’m talking the last 2 or 3 weeks, I’ve seen gas in Europe go from about $13, $14 per MMBtu rise above $20 per MMBtu. Now should it continue to do that, should electricity continue to rise at these rates. I don’t believe that will be the case. But if they were to continue, that obviously is going to pose some headwinds. That’s my biggest concern around Europe right now on a macro basis or energy costs and overall consumer demand. It’s tough to get prices up when you see demand going down and — or languishing and people are obviously fighting over a shrinking pie.
So as I think about Europe, I continue to be optimistic that we will be EBITDA positive in the third quarter there. As you look at it on a macro basis, I would imagine without looking at industry data because there’s not a whole lot that’s published, we’re probably operating in a capacity utilization rate somewhere in the mid-80s on a global basis.
Some areas, I think in the U.S., it’s tighter than that. I think in Europe, it might be a little looser than that. Asia is probably right on top of that. There have been a number of outages that are around. And again, if demand were rising at traditional levels of 4% to 6% per annum sort of growth rate, I think you’d see much tighter markets than today.
Matthew DeYoe BofA Securities, Research Division
Good morning, everyone. Can you talk through the potential impacts of the antidumping duties on U.S. MDI and whether you think that lends to a higher floor over time for that business, what that floor could ultimately look like?
Peter Huntsman Chairman, President & CEO
I think that — well, what the floor ultimately looks like. I don’t want to — I wouldn’t speculate on that, not that I’m trying to avoid an answer as much as I just simply don’t know, but it ought to be better than where we were a year ago. But let’s also be honest, I believe that you’re going to need demand to pick up.
You’re going to need housing to get back to a more normalized run rate to see any real material benefit come from this. And let’s remember, there’s a lot of MDI that’s exported from the United States. It goes into Canada that goes into Mexico. It goes into Latin America and so forth.
There are still imports from around the world that are going into those regions. And for every ton that goes into those regions and pushes U.S.-produced MDI back from those regions back into the United States market. I mean, we can say that, that export-oriented MDI is not coming to the U.S., but it kind of is in a roundabout way, right? And so I think that a lot of people were expecting as soon as this was implemented and put into place, you’re going to see a benefit the next quarter.
Now this is something that will play out over a multi-quarter basis. And you’ll see the greatest benefit of this come about when demand returns and housing returns to a more normalized basis.
Matthew DeYoe BofA Securities, Research Division
Appreciate the answer, Peter. And I’ve been jumping around a little bit, so I apologize if I missed it, but polyol pricing was pretty strong in the quarter. You had an outage, obviously, one of the large competitors, which tightened a fair amount of the market. What was the benefit there? What does that look like in 3Q, 4Q? How is that market managing all that because we also heard some customers on the coating side talking about these shortages domestically as well.
Peter Huntsman Chairman, President & CEO
I wouldn’t say that it was — I heard a lot more horror stories than I think actually happened to the industry. Look, our impact and benefit would be in the low $2 million to $3 million sort of a range — so yes, I’m not sure that it was as big of a deal as some maybe put it out in the media.
David Begleiter Deutsche Bank AG, Research Division
Peter, U.S. MDI supply disruptions in Q2 helped you guys as these disruptions come back online in Q3. Is there a way to quantify the impact to you guys quarter-over-quarter?
Peter Huntsman Chairman, President & CEO
Yes. I’m — we — I wish I could say that we had 100% operating rates during the quarter as well. we had some minor issues, I believe that were reported. But I think across the industry going from second quarter into third quarter, there’s quite a bit of inventory going into second quarter. That was built up for a housing season that really didn’t take off as much as probably some anticipated. Bottom line, I don’t see a whole lot of impact with those restarts going into the third quarter. It looks like it’s pretty flat from a demand — or from a supply/demand basis.
Matthew Blair TPH Research
Thanks and good morning, Peter. Would you say that spray foam is holding up relatively well despite the tough construction environment. I think the prepared remarks mentioned some new wins in select markets. Could you elaborate a little bit more on that?
Peter Huntsman Chairman, President & CEO
Yes. I think that the spray foam, we’ve got excellent leadership in spray foam that’s done a phenomenal job and looking and making their supply chain more efficient, their cost better. And most importantly, their marketing and their sales have been very effective in a lethargic construction environment. We’re seeing low double-digit growth continue to consistently take place. in spray foam energy efficiency. I think that I’m a bit disappointed as to where we were 2 years ago in that business. But I look at where we are today and they’re hitting on all cylinders. They’re doing a great job. So it’s been a great business for us.
Abigail Eberts Wells Fargo Securities, LLC, Research Division
Again, trying to focus on the positives and polyurethanes. Can you speak to the underlying trends driving the growth in the industrial side of the market that you’re seeing?
Peter Huntsman Chairman, President & CEO
Yes, Abigail, thank you very much. As we think about the industrial growth for us, that’s mostly our elastomers business, smaller volumes but much better margins there. And as we see that on a second quarter versus the prior year. In our lastomers business, we’re up double digits in Asia, Europe and in the Americas. So again, that’s going to be a lot of your coatings, a lot of your specialty coatings, adhesives and so forth. Think about when you put coatings on the back of a pickup truck and you’re looking at industrial coatings. So these are fast-growing markets. We’ve got great innovation in these areas and a strong customer base.
Arun Viswanathan RBC Capital Markets, Research Division
Yes, I just wanted to go back to the supply/demand in MDI and we are seeing still some continued — would you characterize the market still in slightly oversupplied situations? And is that mainly rectified through demand improvement? I think you referenced that earlier, but — are there any supply actions that you think would be required at this point?
Peter Huntsman Chairman, President & CEO
No, I think — I believe that it’s pretty well balanced. There’s not a lot of new capacity that’s come on. Industry — look, the industry continues to grow, but it’s just growing at a much slower pace than it has in years past. And what it means is North American housing durable goods. It needs Asia domestic economy to come back and European consumerism to return.
Arun Viswanathan RBC Capital Markets, Research Division
And then I guess when you look out into downstream spray foam and maybe some of the system houses capacity that you have, would you also characterize that as balanced? And does that — and are tight and does that lead to potentially some some greater pricing opportunities downstream, but is it the case that you’re just not able to take advantage of that because of weak demand as well.
Peter Huntsman Chairman, President & CEO
Yes. I think those areas continue to be well balanced. Look, it’s always a — as you go further downstream, there’s always plenty of competition. And you’re always in a race to make sure that as products are commoditized as you’ve got a healthy supply chain of new products, new ideas, new innovation. And I think that we do a good job in that area. But it’s a good balance, I think, between — as things go commodity and as you have new opportunities and new innovation going in.
Michael Harrison Seaport Research Partners
Wanted to ask about polyurethanes pricing in the Americas. Can you give us a sense of what portion of your contracts turn over every quarter — and are there any actions that you can take to maybe work around the contract structure, things like surcharges? Or is there some kind of an opener that would allow you to renegotiate the terms.
Peter Huntsman Chairman, President & CEO
Yes. About 40% of our contracts are formula, meaning that they’re going to be on a longer than a quarter-to-quarter basis. Now those open up on anywhere from every 6 months, every 12 months where you can renegotiate what you’re charging somebody. But those are designed to be able to take in and absorb benzene and natural gas prices and so forth. So as you think about that, about every 6 to 12 months, most of these contracts will have a pit stop where you can pull over and renegotiate, if you will, which I’m not a big fan of either of those, I’d rather have it where we can move prices instantaneous with market conditions. But — we are where we are in polyurethanes that’s largely dictated by competition.
But yes, we are aggressively moving on surcharges on everything and everywhere that we can. And at the same time, we also want to make sure that as you think about your customer relationships that you’re taking care of your customers because if you’re taking advantage of them today, the table turn pretty quickly in this industry. So yes, we do honor our contracts. We do honor our pricing formulas that we entered into. It doesn’t mean I’m always happy with those, but it is what it is.
Michael Harrison Seaport Research Partners
And then I was hoping you could also provide some more color on how the situation in the Middle East is impacting your PO MTBE business in China. It looks like there was a nice benefit in the second quarter. And I’m just curious, would you expect the third quarter benefit to be greater than what you saw in Q2?
Peter Huntsman Chairman, President & CEO
I think you’re probably going to be flat Q2 to Q3. A lot of the gasoline supplies oxygenated levels and values and so forth. To some degree, those are going to be government dictate. And so it’s not as free-flowing. I would say, as you would see in the Americas or even in Europe. But I’d say, from Q2 to Q3, it’s going to be flat.
