Huntsman Corporation — Form 10-Q Summary
Period clarification: The supplied filing is for the quarter ended March 31, 2021 (Q1 2021), not Q1 2020 as indicated in the request metadata. Amounts below are in U.S. dollars; financial figures are in millions except per-share data.
Business context and reporting period
Huntsman is a global manufacturer of differentiated chemicals, operating through Polyurethanes, Performance Products, Advanced Materials and Textile Effects. Huntsman International LLC is its wholly owned principal operating subsidiary. The filing compares Q1 2021 with Q1 2020; results exclude the chemical intermediates businesses sold in January 2020.
Financial performance and condition
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $1,837 | $1,593 |
| Gross profit | $392 | $297 |
| Operating income | $126 | $54 |
| Continuing-operations income attributable to Huntsman | $82 | $(72) |
| Net income attributable to Huntsman | $83 | $705 |
| Adjusted EBITDA | $289 | $165 |
| Basic / diluted EPS | $0.38 / $0.37 | $3.16 / $3.16 |
| Cash from continuing operating activities | $(16) | $(40) |
| Free cash flow from continuing operations | $(114) | $(101) |
Revenue increased 15%; gross profit rose 32% and operating income more than doubled. Gross margin was approximately 21.3%, up from 18.6%; operating margin was approximately 6.9%, up from 3.4%. Adjusted EBITDA increased 75%. The reported net-income comparison is distorted by the $777 million of discontinued-operations income in Q1 2020, including a substantial gain on the sale of the chemical intermediates businesses. Q1 2021 continuing-operations income was positive.
By segment, revenue and adjusted EBITDA were: Polyurethanes $1,068 and $207; Performance Products $305 and $63; Advanced Materials $278 and $44; and Textile Effects $193 and $25. Polyurethanes EBITDA rose sharply with improved MDI margins. Advanced Materials EBITDA declined from $48 million to $44 million, partly reflecting lower aerospace volumes.
At March 31, cash was $673, total debt $1,567 and net debt approximately $894. The company reported $2,064 of combined cash and unused borrowing capacity: $673 cash, $1,194 available on its revolving facility and $197 available under receivables programs. Current assets were $2,929 versus current liabilities of $1,564. Cash fell from $1,593 at year-end, reflecting debt repayment, acquisition spending and other cash uses. Continuing-operations operating cash flow remained negative, and capital expenditures were $98 million.
Material changes, outlook and management commentary
- Revenue growth reflected higher sales volumes in most segments and higher average selling prices, especially in Polyurethanes and Performance Products. Winter Storm Uri and operational downtime affected volumes.
- Huntsman acquired Gabriel Performance Products for approximately $249 million in January 2021 and is integrating it into Advanced Materials. Gabriel contributed $23 million of revenue and $4 million of net income from acquisition through quarter-end; purchase-price allocation remains preliminary.
- The company redeemed €445 million (approximately $541 million) of 2021 senior notes in January, reducing total debt and the current portion of debt; this also resulted in about $15 million of incremental cash tax liability.
- Management estimated Q2 2021 adjusted EBITDA would be approximately 5% above Q1 for Polyurethanes, approximately 10% higher for Performance Products and Advanced Materials, and approximately 25% higher for Textile Effects. Polyurethanes guidance included an estimated $25 million impact from the Rotterdam turnaround and lower expected component MDI and polymeric-systems margins in China.
- Management expected a 2021 adjusted effective tax rate of approximately 22%–24%. It forecast approximately $330 million of 2021 capital expenditures, including about $80 million for a new Geismar MDI splitter, and expected a further approximately $42 million of pension and postretirement contributions during 2021.
- Management cited expected annualized cost savings and synergies exceeding $120 million by the end of 2023, with approximately $100 million of associated net cash restructuring and integration costs. Q1 restructuring, impairment and plant-closing costs were $24 million, versus $3 million a year earlier.
- The board declared a $0.1875-per-share dividend after quarter-end, a 15% increase. The filing states this would add approximately $5.5 million in quarterly dividend distributions.
Risks, contingencies and unusual items
Management noted continuing exposure to COVID-19 impacts, raw-material costs, foreign exchange, interest rates, commodity prices, and working-capital volatility. Storm Uri and scheduled or unplanned outages affected operations. The company reported legal, environmental and remediation matters; it had $4 million accrued for environmental liabilities, but stated potential excess remediation costs could not be estimated. It could not reasonably estimate its potential liability at the North Maybe Canyon Mine site. Management said it believed it was in compliance with material debt covenants and that existing liquidity should support operations for the foreseeable future. Forward-looking statements remain subject to risks described in the filing and the 2020 Form 10-K.
Key facts for investors to verify
- Confirm the reporting-period mismatch: this filing covers Q1 2021, not Q1 2020.
- Review the sustainability of improved MDI pricing and margins, and the effects of the Rotterdam turnaround and supply disruptions.
- Track operating cash flow, working-capital needs, capital spending and liquidity after the debt redemption, acquisition and dividend increase.
- Assess Gabriel integration, final acquisition accounting, synergies and restructuring cash costs.
- Separate continuing operating performance from the prior-year discontinued-operations gain and review the company’s non-GAAP adjusted EBITDA and free-cash-flow reconciliations.
- Monitor aerospace recovery, environmental and legal exposures, and the stated tax-rate outlook.