Huntsman Corporation — Form 10-Q Summary
Period: The filing covers the quarter and six months ended June 30, 2023, not Q2 2022 as stated in the request metadata. Comparisons below are against the corresponding 2022 periods. Huntsman International LLC is the wholly owned principal operating subsidiary. The company manufactures chemicals through Polyurethanes, Performance Products and Advanced Materials.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $1.596 billion | $2.170 billion | $3.202 billion | $4.362 billion |
| Gross profit | $254 million | $492 million | $523 million | $1.007 billion |
| Operating income | $50 million | $278 million | $111 million | $561 million |
| Income from continuing operations | $33 million | $229 million | $77 million | $451 million |
| Net income attributable to Huntsman Corporation | $19 million | $228 million | $172 million | $451 million |
| Diluted earnings per share | $0.11 | $1.10 | $0.94 | $2.14 |
| Adjusted EBITDA | $156 million | $410 million | $292 million | $797 million |
Q2 gross margin was approximately 15.9%, versus 22.7% a year earlier; operating margin was approximately 3.1%, versus 12.8%. Revenue fell 26% in Q2 and 27% in the first half. Management cited lower sales volumes across all segments and lower average selling prices in most segments. Adjusted EBITDA declined 62% in Q2 and 63% for the first half.
For Q2, segment adjusted EBITDA was $88 million in Polyurethanes (down from $229 million), $55 million in Performance Products (down from $152 million) and $51 million in Advanced Materials (down from $67 million). Management attributed weakness to lower demand and volumes, weaker MDI pricing and margins, and reduced construction, coatings, adhesives and industrial demand. Advanced Materials pricing and mix improved, partly offsetting lower volumes.
Cash flow, balance sheet and liquidity
- For the first six months, continuing-operations operating cash flow was negative $82 million, compared with positive $310 million in 2022. Capital expenditures were $97 million, making continuing-operations free cash flow negative $179 million, versus positive $181 million.
- Cash from the sale of businesses was $541 million, primarily the Textile Effects divestiture. Total cash declined $152 million to $502 million. Financing activities used $464 million, including $194 million for common-stock repurchases, $87 million for dividends and $164 million of net repayments on revolving and receivables facilities.
- At June 30, 2023, total debt was $1.573 billion, down from $1.737 billion at year-end 2022. Cash was $502 million; reported combined cash and unused borrowing capacity was $1.866 billion. The $1.2 billion revolving facility had no borrowings outstanding; $13 million of letters of credit and guarantees were outstanding under it.
- Working capital was $1.344 billion, down $100 million from year-end. Current assets were $2.520 billion and current liabilities $1.176 billion. Huntsman said it believed it was in compliance with material debt covenants.
Material developments, outlook and risks
- Huntsman completed the sale of Textile Effects on February 28, 2023. It received $530 million in net proceeds and recorded a $153 million pretax gain in Q1. First-half discontinued-operations income was $120 million, substantially reflecting the sale; Q2 discontinued operations recorded a $2 million loss.
- Management expected 2023 capital expenditures of approximately $230–$250 million, pension and postretirement contributions of about $19 million in the remainder of 2023, and approximately $200 million of share repurchases in the second half. These are stated expectations, not earnings guidance.
- Cost plans target annualized savings of about $140 million during 2023 and further savings of about $100 million by year-end 2023. A separate Europe restructuring program targets approximately $40 million of annualized savings by year-end 2023. The filing describes related restructuring and implementation costs extending into future periods.
- The planned separation of the Shanghai Lianheng Isocyanate joint venture with BASF was announced July 31, after quarter-end. It was expected to take effect in Q4 2023, subject to regulatory approvals and other conditions.
- A jury award against Praxair/Linde remains under appeal and has not been recognized. If affirmed, Huntsman expected net proceeds of approximately $50–$60 million. The filing also discusses environmental remediation obligations, including the North Maybe Canyon Mine site, where potential liability could not be reasonably estimated.
- Market risks include foreign-exchange, interest-rate and commodity-price movements. Management identified weak demand, lower selling prices and volumes as significant current operating pressures. It also cautioned that interim results may not indicate full-year results.
Most important facts for investors to verify
- Whether demand, selling prices, volumes and segment margins recover, particularly in Polyurethanes and Performance Products.
- Whether operating cash flow and free cash flow improve after first-half cash use, and how planned capital spending, dividends and buybacks are funded.
- Progress toward stated cost-savings targets and the remaining cash costs and timing of restructuring programs.
- Final Textile Effects sale-price adjustments and tax payments, and any developments in the Praxair/Linde appeal.
- Regulatory and execution progress on the planned SLIC separation, alongside environmental and other contingent liabilities.