Huntsman Corporation — Form 10-Q Summary
Period discrepancy: The request identifies 2021 Q1, but the supplied filing is for the quarter ended March 31, 2022, with comparisons to Q1 2021. This summary covers the filing provided.
Business context and reporting period
Huntsman is a global differentiated-chemicals manufacturer operating through four segments: Polyurethanes, Performance Products, Advanced Materials and Textile Effects. Huntsman International LLC is its wholly owned principal operating subsidiary. The filing presents unaudited results for the three months ended March 31, 2022.
Financial results and liquidity
Amounts are in millions of U.S. dollars unless stated otherwise.
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $2,389 | $1,837 | +30% |
| Gross profit | $565 | $392 | +44% |
| Gross margin | 23.7% | 21.3% | +2.4 percentage points |
| Operating income | $304 | $126 | +141% |
| Net income | $240 | $100 | +140% |
| Net income attributable to Huntsman Corporation | $223 | $83 | +169% |
| Diluted EPS | $1.04 | $0.37 | Higher |
| Adjusted EBITDA | $415 | $289 | +44% |
| Cash from operating activities | $85 | $(16) | Improved |
| Free cash flow | $16 | $(114) | Improved |
Revenue growth reflected higher average selling prices in all segments and higher volumes in Polyurethanes and Performance Products. Gross margin and adjusted EBITDA improved. Segment adjusted EBITDA was $224 million in Polyurethanes, $146 million in Performance Products, $67 million in Advanced Materials and $28 million in Textile Effects.
Cash and cash equivalents were $807 million at quarter-end, down from $1,041 million at December 31, 2021. Total debt was $1.55 billion, approximately unchanged; cash less debt implies approximate net debt of $743 million. The current ratio was approximately 1.9, based on $3.99 billion of current assets and $2.12 billion of current liabilities. Huntsman reported $2.26 billion of combined cash and unused borrowing capacity. Its $1.2 billion revolving facility had no borrowings, and its accounts-receivable programs also had no borrowings outstanding.
Working capital was $1.87 billion, nearly unchanged from year-end. Higher receivables and inventory tied up cash; inventory rose $181 million. Capital expenditures were $69 million. Financing outflows included $203 million of common-stock repurchases and $46 million of dividends.
Material changes versus Q1 2021
- Revenue increased 30%, with segment revenue growth led by Performance Products (+57%) and Polyurethanes (+30%). Advanced Materials rose 21%; Textile Effects rose 2%.
- Segment adjusted EBITDA increased 37% to $465 million before corporate and other costs. Performance Products’ adjusted EBITDA more than doubled to $146 million; Polyurethanes rose to $224 million from $207 million.
- Operating income benefited from stronger gross profit and no restructuring charges, versus $24 million in Q1 2021. Lower interest expense and a smaller Venator fair-value loss also helped, while equity income from unconsolidated affiliates fell to $15 million from $38 million.
- Operating cash flow improved from a use of $16 million to a source of $85 million. Capital spending was lower, and Q1 2021 included the Gabriel acquisition.
Outlook, risks and unusual items
- Management estimated Q2 2022 adjusted EBITDA of $210–$230 million for Polyurethanes, $130–$140 million for Performance Products, $62–$68 million for Advanced Materials and $29–$31 million for Textile Effects. These are forward-looking estimates, not guarantees.
- Management expected a 2022 adjusted effective tax rate of approximately 22%–24%, versus 21% in Q1.
- Management cited China COVID-related lockdowns as a headwind to volumes across segments, higher European costs as a Polyurethanes headwind, and elevated raw-material, energy and logistics costs. It noted positive insulation demand, commercial initiatives and sustainability trends as supportive factors.
- Huntsman expected to receive the remaining $332.5 million Albemarle settlement payment by early May 2022 and expected approximately $255 million of related legal fees and cash taxes in Q2. The balance sheet included a $333 million receivable associated with the settlement.
- The share-repurchase authorization was increased from $1 billion to $2 billion. Huntsman repurchased 5.55 million shares for approximately $210 million during Q1 and reported additional repurchases after quarter-end. The quarterly dividend was increased 13% to $0.2125 per share.
- Management expected approximately $300 million of 2022 capital expenditures and an additional $36 million of pension and postretirement contributions during the rest of 2022. It also cited expected annualized cost savings of approximately $140 million from prior plans and $100 million from additional plans by the end of 2023.
- Environmental and legal exposures include remediation obligations and claims. Environmental reserves were $5 million; the company said potential losses in excess of reserves could occur but could not estimate the amount or range. It could not reasonably estimate potential liability for the North Maybe Canyon Mine site.
- The filing identifies market risks from interest rates, foreign exchange and commodity prices, and discusses potential effects of COVID-19 and expansion of the Russia-Ukraine conflict. Management stated it believed the company was in compliance with material debt covenants.
Most important facts for investors to verify
- Confirm the intended reporting period: the supplied filing is Q1 2022, not Q1 2021.
- Track whether the Albemarle payment was received and how the related fees and taxes affected Q2 cash flow.
- Compare subsequent segment results with the Q2 adjusted EBITDA estimates and assess the effects of China lockdowns and European costs.
- Monitor working-capital needs, cash conversion, capital spending and progress toward stated cost savings.
- Review share repurchases, dividends and remaining liquidity alongside debt maturities, covenant compliance and environmental or other contingent exposures.
- Interpret adjusted EBITDA, adjusted net income and free cash flow alongside GAAP results; the filing notes that these non-GAAP measures may not be comparable across companies.