Huntsman Corporation Form 10-Q Summary
Period and scope: The supplied filing is for the quarter ended June 30, 2022, filed August 2, 2022—not 2021 Q2 as indicated in the request metadata. It reports Huntsman Corporation and its wholly owned principal operating subsidiary, Huntsman International LLC. Financial amounts below are in U.S. dollars; the statements are unaudited.
Business context and financial performance
Huntsman is a global differentiated chemicals manufacturer operating in Polyurethanes, Performance Products, Advanced Materials and Textile Effects. The company serves industrial and consumer markets worldwide.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $2,362 million | $2,024 million | $4,751 million | $3,861 million |
| Gross profit | $538 million | $431 million | $1,103 million | $823 million |
| Operating income | $293 million | $209 million | $597 million | $335 million |
| Net income attributable to Huntsman Corporation | $228 million | $156 million | $451 million | $239 million |
| Diluted earnings per share | $1.10 | $0.70 | $2.14 | $1.07 |
| Adjusted EBITDA | $432 million | $334 million | $847 million | $623 million |
Q2 gross margin was approximately 22.8%, compared with 21.3% a year earlier; operating margin was approximately 12.4%, compared with 10.3%. Adjusted EBITDA margin was approximately 18.3%, versus 16.5%. These percentages are calculated from reported figures.
Cash flow, debt and liquidity
- For the six months ended June 30, 2022, operating cash flow from continuing operations was $316 million, versus cash used of $23 million in the prior-year period. Capital expenditures were $138 million, yielding company-defined free cash flow of $178 million, compared with negative $197 million.
- Cash and cash equivalents were $608 million at June 30, down from $1,041 million at December 31, 2021. Total debt was $1,521 million, down from $1,550 million; reported net debt was approximately $913 million. Huntsman reported $2,052 million of combined cash and unused borrowing capacity, including $1,197 million available on its revolving facility and $247 million under receivables programs.
- Working capital was $1,815 million, down $62 million from year-end. Receivables and inventory increased by $102 million and $200 million, respectively; the $333 million Albemarle-related receivable was collected, while accrued liabilities declined $354 million.
- Cash used in financing was $609 million, including $504 million for common-stock repurchases and $91 million of dividends paid. Cash used in investing was $129 million.
Material changes versus the prior comparable period
- Q2 revenue increased 17% and first-half revenue increased 23%, primarily on higher selling prices across segments; lower sales volumes partly offset growth. Cost of goods sold rose less quickly than revenue, contributing to higher gross profit and margins.
- Q2 adjusted EBITDA increased 29% to $432 million. Performance Products EBITDA rose to $152 million from $88 million; Polyurethanes rose to $229 million from $208 million; Advanced Materials rose to $67 million from $58 million. Textile Effects declined to $22 million from $28 million.
- First-half adjusted EBITDA increased 36% to $847 million. Performance Products and Advanced Materials improved substantially; Textile Effects EBITDA decreased. Equity income from unconsolidated affiliates fell to $19 million in Q2 from $46 million, and to $34 million for the half from $84 million, mainly due to weaker results at the China PO/MTBE joint venture.
- Quarterly net income growth also reflects the absence of the prior-year $27 million debt-extinguishment loss. The prior-year comparison included a $28 million gain on the sale of the India-based DIY business; no such gain occurred in 2022.
- Foreign currency translation reduced first-half comprehensive income: other comprehensive loss was $117 million, compared with $29 million of other comprehensive income in the first half of 2021.
Outlook, commentary and risks
- Management estimated Q3 2022 adjusted EBITDA of $170–$200 million for Polyurethanes, $130–$140 million for Performance Products, $58–$63 million for Advanced Materials, and $20–$22 million for Textile Effects. The filing provides no consolidated Q3 adjusted EBITDA guidance.
- Management cited weaker European demand, regional natural-gas price volatility, lower China joint-venture earnings, seasonality, lower China margins and demand headwinds in Europe. Price increases, improved product mix, commercial initiatives and cost controls were cited as offsets in certain businesses.
- Management expected a 2022 adjusted effective tax rate of approximately 22%–24%; the Q2 effective and adjusted effective tax rates were each 22%. The outlook is subject to market and jurisdictional tax-mix effects.
- Huntsman entered a new $1.2 billion unsecured revolving credit facility maturing in May 2027. Its pricing and commitment fees can adjust with performance against specified greenhouse-gas-intensity and water-consumption-intensity targets. The company reported compliance with material debt covenants.
- Huntsman expects approximately $300 million of 2022 capital expenditures and an additional $23 million of pension and postretirement contributions during the remainder of the year. It also expects further restructuring costs through 2023 and continues longer-term savings programs.
- A jury awarded Huntsman approximately $94 million in its Praxair/Linde litigation; the company expects damages exceeding $125 million after interest. The award is subject to appeal and was not recognized in earnings.
- Environmental liabilities accrued were $5 million. The company notes that remediation losses could exceed accrued amounts and that it cannot estimate the potential excess; it is unable to reasonably estimate its potential liability at the North Maybe Canyon Mine site. It also identifies ongoing remediation requirements at its Geismar facility.
- Management identifies exposure to interest rates, foreign exchange rates and commodity prices. Forward-looking statements are subject to risks including economic and market conditions, COVID-19 and possible effects of the Russia-Ukraine conflict.
Most important facts for investors to verify
- Confirm the requested period: the filing covers Q2 2022, despite the request metadata saying 2021 Q2.
- Assess whether price-driven revenue and margin gains can persist amid lower volumes, weaker demand and input-cost volatility.
- Track cash conversion and working-capital needs, especially inventory, receivables and accrued-liability movements, alongside substantial repurchases and dividends.
- Review Q3 segment guidance against subsequent results, particularly European demand and natural-gas costs, China joint-venture earnings, and Textile Effects volumes.
- Monitor the appeal and collectability/timing of the Praxair/Linde award; it is not included in reported earnings.
- Review the company’s adjusted EBITDA and free-cash-flow definitions and reconciliations, as these are non-GAAP measures.