Business context and reporting period
Huntsman Corporation’s filing is a Form 10-K for the fiscal year ended December 31, 2020, not 2019 Q4 as indicated in the request metadata. Huntsman International LLC is its wholly owned principal operating subsidiary. Huntsman manufactures differentiated chemicals across Polyurethanes, Performance Products, Advanced Materials and Textile Effects.
Financial performance and position
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $6.018 billion | $6.797 billion |
| Gross profit / gross margin | $1.100 billion / 18.3% | $1.382 billion / 20.3% |
| Operating income | $433 million | $469 million |
| Income from continuing operations | $291 million | $429 million |
| Net income attributable to Huntsman Corporation | $1.034 billion | $562 million |
| Adjusted EBITDA | $647 million | $846 million |
| Continuing-operations operating cash flow | $277 million | $656 million |
| Capital expenditures | $249 million | $274 million |
| Free cash flow from continuing operations | $28 million | $382 million |
2020 net income included $775 million of after-tax income from discontinued operations, including the Chemical Intermediates Businesses sale; it therefore does not represent a comparable improvement in ongoing operations. Diluted EPS was $4.66 overall, including $1.17 from continuing operations. Adjusted net income was $218 million, versus $353 million in 2019.
At year-end, cash was $1.593 billion and total debt was $2.121 billion, including $593 million classified as current; net debt was approximately $528 million. The company reported $2.952 billion of cash and unused borrowing capacity, including $1.194 billion available under its revolving credit facility and $165 million under receivables programs. Working capital was $1.589 billion, down $252 million from 2019.
Material changes versus 2019
- Revenue fell 11%; management attributed the decline to lower volumes across all segments and lower average selling prices in most segments amid COVID-19 disruptions.
- Adjusted EBITDA declined 24%. Segment adjusted EBITDA decreased in Polyurethanes (14%), Performance Products (2%), Advanced Materials (35%) and Textile Effects (50%).
- Continuing-operations cash flow fell substantially, with free cash flow declining to $28 million.
- Portfolio changes included the January 2020 sale of the Chemical Intermediates Businesses to Indorama for approximately $1.92 billion cash, the November sale of the India-based DIY adhesives business for approximately $257 million, and the December sale of Venator shares for approximately $99 million. Huntsman also acquired Icynene-Lapolla and CVC Thermoset Specialties for $353 million and $304 million, respectively.
- Reported operating expenses included a $247 million pretax gain on the DIY business sale. A Basel property sale-and-leaseback generated a pretax gain of approximately $33 million.
Outlook, commentary and risks
Management expected improving conditions in most core markets, while cautioning that COVID-19’s duration and financial impact remained uncertain. For Q1 2021, it projected Polyurethanes adjusted EBITDA at slightly more than double Q1 2020, Performance Products up approximately 10%–15% year over year, Advanced Materials up approximately 40% from Q4 2020, and Textile Effects slightly higher year over year. The 2021 adjusted effective tax rate was projected at approximately 22%–24%.
Management targeted more than $120 million in annualized cost savings and synergies by the end of 2023, with approximately $100 million of net cash restructuring and integration costs. 2021 capital expenditures were projected at $320 million–$330 million, and expected pension and postretirement contributions were approximately $60 million. Annual insurance expense was expected to rise from $32 million in 2020 to $52 million in 2021.
Key risks include continued pandemic-related demand weakness—particularly in aerospace and consumer textiles—cyclical chemical markets, raw-material price and supply volatility, plant interruptions, foreign-exchange movements, environmental and regulatory obligations, and acquisition integration. The company disclosed $680 million of pension liabilities and stated that some pension and postretirement obligations are underfunded. It was in compliance with material debt covenants at year-end. An arbitration concerning alleged fraud and breach of contract related to the Augusta facility was pending, with a hearing scheduled for May 2021; the filing does not provide a clear estimate of potential recovery.
Subsequent events: Huntsman redeemed its €445 million 2021 Senior Notes on January 15, 2021, for approximately $541 million, and completed the approximately $250 million Gabriel Performance Products acquisition on the same date. The redemption reduced the near-term maturity burden but used liquidity.
Most important facts for investors to verify
- Separate ongoing performance from disposal-related earnings: verify the discontinued-operations contribution and one-time sale gains against continuing-operations results.
- Review segment volume, pricing and margin recovery, especially in Advanced Materials and Textile Effects, and compare results with the Q1 2021 outlook.
- Track cash generation, working capital, capital spending and the impact of the note redemption and Gabriel acquisition on liquidity and net debt.
- Assess whether the planned cost savings are realized and whether restructuring and integration costs remain within the stated estimate.
- Monitor COVID-19 exposure, pension funding needs, environmental contingencies and the outcome of the Augusta arbitration.