Huntsman Corporation — Form 10-Q Summary
Period clarification: The filing covers the quarter ended March 31, 2024, not Q1 2023. Comparisons below are with the three months ended March 31, 2023. Amounts are in U.S. dollars; financial figures are in millions unless stated otherwise. Huntsman International LLC is the wholly owned principal operating subsidiary, and its results are substantially similar.
Business context and reporting period
Huntsman manufactures diversified organic chemicals through three reportable segments: Polyurethanes, Performance Products and Advanced Materials. Its products serve industrial and building-products markets across a range of end uses. Results exclude the Textile Effects business, sold in February 2023, from continuing operations.
Key financial metrics
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $1,470 | $1,606 |
| Gross profit / gross margin | $201 / 13.7% | $269 / 16.7% |
| Operating income (loss) | $(38) | $61 |
| Continuing operations income (loss), attributable to Huntsman Corporation | $(30) | $31 |
| Net income (loss), attributable to Huntsman Corporation | $(37) | $153 |
| Adjusted EBITDA | $81 | $136 |
| Operating cash flow from continuing operations | $(63) | $(122) |
| Capital expenditures from continuing operations | $42 | $46 |
| Free cash flow from continuing operations | $(105) | $(168) |
Revenue fell 8% year over year, primarily from lower average selling prices across all segments, partly offset by higher volumes in Polyurethanes and Performance Products. Gross profit fell 25%; adjusted EBITDA declined 40%. Segment adjusted EBITDA was $39 in Polyurethanes (down 41%), $42 in Performance Products (down 41%) and $43 in Advanced Materials (down 10%).
Cash and cash equivalents were $552 at March 31, 2024, versus $540 at year-end 2023. Total debt was $2,056, up from $1,688; this included $396 of current debt, including a $195 revolving-facility balance and a $190 SLIC-related note payable. Working capital was $864, down $278 from year-end. Huntsman reported $1,607 of combined cash and unused borrowing capacity: $552 cash, $995 available under its revolving facility and $60 under receivables programs.
Material changes versus the prior comparable period
- All segments reported lower revenue. Polyurethanes revenue was down 7%, Performance Products down 13% and Advanced Materials down 10%. Management cited lower prices and mix; sales volumes rose in the first two segments but declined in Advanced Materials.
- Q1 2024 included a preliminary $52 bargain-purchase gain on the acquisition of SLIC assets and a $71 write-off of prepaid assets related to SLIC operating agreements. The transaction also resulted in a discrete $18 tax benefit. Final asset valuation remained pending.
- Q1 2023 included $122 of after-tax income from discontinued operations, including a gain on the Textile Effects sale. Q1 2024 discontinued operations recorded a $7 loss, including an $8 post-closing charge.
- Operating cash use from continuing operations improved year over year, but free cash flow remained negative. Management attributed the improvement mainly to changes in operating assets and liabilities; investing cash flow also differed substantially because Q1 2023 included proceeds from the Textile Effects sale.
Outlook, commentary, risks and unusual items
- Outlook and planned spending: The filing provides no specific revenue or earnings guidance. Huntsman expects approximately $200 of capital expenditures in 2024 and approximately $23 of additional pension and postretirement contributions during the remainder of the year. It expects to pay the remaining SLIC note by year-end 2024 using HPS funds.
- Restructuring and savings: Huntsman reported more than $280 of combined annualized cost savings and synergies from its cost realignment and synergy plans. It expects total cash costs of approximately $293 through 2025, including capital expenditures, with approximately $255 spent through Q1 2024. Additional restructuring expenses are expected under several programs.
- Debt and liquidity: The company said it was in compliance with material debt covenants. It intends to renew, repay or extend most of the $396 current debt balance within the next 12 months. Receivables-program availability depends on eligible receivables and related performance metrics; certain failures could trigger early termination and repayment requirements.
- Legal matter: On April 19, 2024, an appeals court affirmed a $93.1 jury verdict in Huntsman’s favor against Praxair/Linde. Including interest, damages could exceed $135 before taxes and legal fees; Huntsman estimated potential net proceeds of $50–$60 if the award stands. The award was not recognized in Q1 results, remains subject to further review and has uncertain timing.
- Environmental and market risks: Environmental liabilities accrued were $14 at quarter-end, versus $5 at year-end; remediation costs could exceed accrued amounts, and the company could not estimate the potential excess. Huntsman also disclosed exposure to interest rates, foreign exchange and commodity prices. Management cautioned that interim results may not indicate full-year performance.
- Capital returns: The quarterly dividend was $0.25 per share, approximately 5% above the previous dividend. Approximately $547 remained under the share repurchase authorization; the company reported no program repurchases in Q1, although shares were withheld upon vesting for tax obligations.
Important facts for investors to verify
- Whether the final SLIC asset valuation changes the preliminary bargain-purchase gain, acquisition allocation or remaining note payable.
- How quickly pricing, segment margins and adjusted EBITDA recover, particularly in Polyurethanes and Performance Products.
- Whether operating cash flow and free cash flow improve, and how working-capital movements affect that trend.
- How the company will manage current debt maturities and fund capital spending, restructuring costs, pension contributions and dividends.
- The outcome, timing and net proceeds, if any, of the Praxair/Linde litigation after further review.
- Whether environmental remediation obligations or other contingencies require additional reserves or cash spending.