Huntsman Corporation — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Although the request metadata says “2022 Q4,” the supplied filing is the 2023 annual report, filed February 22, 2024. Huntsman International LLC is the wholly owned principal operating subsidiary. Unless noted, amounts are U.S. dollars.
Business context
Huntsman is a global chemicals manufacturer operating in Polyurethanes, Performance Products and Advanced Materials. Its products serve industrial and building markets, including construction, insulation, automotive, aerospace, coatings and adhesives. The 2023 results primarily reflect continuing operations and exclude Textile Effects, which was sold in February 2023.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $6.111 billion | $8.023 billion |
| Gross profit / gross margin | $906 million / 14.8% | $1.546 billion / 19.3% |
| Operating income / operating margin | $84 million / 1.4% | $672 million / 8.4% |
| Income from continuing operations | $35 million | $511 million |
| Net income | $153 million | $523 million |
| Net income attributable to Huntsman Corporation | $101 million | $460 million |
| Continuing-operations income attributable to Huntsman Corporation | Loss of $17 million | Income of $448 million |
| Adjusted EBITDA (non-GAAP) | $472 million | $1.155 billion |
| Operating cash flow from continuing operations | $251 million | $892 million |
| Capital expenditures | $230 million | $272 million |
| Free cash flow from continuing operations (non-GAAP) | $21 million | $620 million |
Revenue fell 24%; adjusted EBITDA fell 59%. Continuing-operations gross and operating margins contracted substantially. 2023 net income included $118 million of after-tax discontinued-operations income, including the gain on the Textile Effects sale; continuing-operations income attributable to Huntsman was negative.
At year-end, cash and cash equivalents were $540 million, total debt was $1.688 billion and net debt was approximately $1.148 billion. Current assets of $2.314 billion exceeded current liabilities of $1.172 billion (working capital $1.142 billion). Huntsman reported $1.738 billion of combined cash and unused borrowing capacity: $540 million cash, $1.196 billion available under its revolving facility and $2 million under receivables programs. Total equity was $3.478 billion.
Segments and changes versus 2022
| Segment | 2023 revenue | 2023 adjusted EBITDA | Change in adjusted EBITDA |
|---|---|---|---|
| Polyurethanes | $3.865 billion | $248 million | Down 61% |
| Performance Products | $1.178 billion | $201 million | Down 57% |
| Advanced Materials | $1.092 billion | $186 million | Down 20% |
- Polyurethanes revenue declined 24%, mainly from weaker volumes, lower MDI selling prices and unfavorable currency translation. EBITDA also reflected lower MDI margins and the absence of a 2022 insurance settlement benefit; cost savings and higher China joint-venture earnings partly offset the decline.
- Performance Products revenue fell 31% as volumes and selling prices declined amid slower construction and weaker coatings, adhesives, agriculture, lubricants and industrial demand.
- Advanced Materials revenue declined 14%, primarily on lower volumes in infrastructure markets and the exit from lower-margin business; average selling prices were broadly stable.
- Management attributed the overall deterioration mainly to lower sales volumes and prices across the portfolio. Corporate and other adjusted EBITDA improved modestly, to a loss of $163 million from a loss of $175 million.
Outlook, capital allocation and material items
- Management expected approximately $200 million of 2024 capital expenditures and approximately $34 million of 2024 pension and postretirement contributions. The filing does not provide a clear numerical earnings or revenue forecast.
- Cost-realignment programs had delivered more than $280 million of combined annualized savings and synergies. Huntsman expected total program cash costs of approximately $285 million through 2025, including about $56 million of capital expenditures; approximately $230 million had been spent through 2023.
- On February 16, 2024, the board declared a quarterly dividend of $0.25 per share, about 5% above the previous dividend. Approximately $547 million remained under the share-repurchase authorization at year-end; 2023 repurchases were about $350 million.
- The February 2023 Textile Effects sale generated $530 million of net proceeds and a $154 million pretax gain. Final purchase-price adjustments were still pending; the company expected about $15 million of additional cash taxes after paying approximately $23 million in 2023.
- After year-end, Huntsman completed the separation and acquisition of assets from the SLIC Chinese manufacturing joint venture on January 31, 2024. HPS issued a note of approximately $230 million, subject to final valuation; about $26 million had been paid by that date. The joint venture liquidation was anticipated by mid-2025.
- The planned sale of the Polyurethanes business in Russia and Belarus remained subject to approvals, with timing and completion uncertain.
- A 2022 jury award against Praxair/Linde was expected to exceed $125 million before taxes and legal fees, but remained under appeal and had not been recognized. If affirmed, Huntsman estimated net proceeds of $50–$60 million.
Risks, contingencies and controls
- Key risks include cyclical chemical markets, continued weak demand, selling-price and raw-material volatility, energy costs, supply interruptions, facility outages, foreign-exchange exposure, competition and customer credit risk.
- Environmental, health and safety regulation, climate-related requirements, remediation obligations and pension funding may create additional costs. Recorded environmental liabilities were $5 million, but potential excess remediation costs could not be estimated. 2024 EHS capital expenditures were estimated at about $40 million.
- The company disclosed a Texas emissions enforcement suit concerning alleged events at its former Port Neches facility; it believes it is contractually indemnified. The filing also describes other ordinary-course proceedings, which management did not expect to have a material effect.
- Valuation allowances for deferred tax assets totaled $221 million, up from $169 million; the net deferred tax liability was $131 million. Realizability of deferred tax assets was identified as a critical audit matter, involving significant judgments about future taxable income.
- Management stated that it was in compliance with material debt covenants. The $1.2 billion revolving facility matures in May 2027; receivables-program maturities were extended to 2027 after year-end. Total debt maturities included $344 million in 2025.
- Deloitte issued unqualified opinions on the financial statements and Huntsman Corporation’s internal control over financial reporting. Management also concluded disclosure controls and internal controls were effective at year-end.
Most important facts for investors to verify
- Whether demand, pricing and margins in each segment recover from the sharp 2023 declines, particularly in Polyurethanes and Performance Products.
- Whether operating cash flow and free cash flow improve from $251 million and $21 million, respectively, and support planned capital spending, dividends and repurchases.
- Final Textile Effects sale adjustments and taxes, and the final price, funding and liquidation outcomes for the SLIC asset acquisition.
- Progress and remaining costs of restructuring, and whether the reported annualized savings are sustained.
- Resolution of the Praxair/Linde appeal, the Texas emissions matter, and significant tax and environmental contingencies.
- Debt maturities, available liquidity and covenant headroom if earnings remain weak; also assess the effect of the Russia and Belarus divestiture process.