MDI Imports: Imports into the Americas dropped by 60% by the end of March, with a greater than 75% drop from China. MDI Pricing: Chinese MDI prices fell but have stabilized and recovered by 10% recently. Tariffs Impact: North American MDI tariffs have a significant impact, with only 1 kiloton imported from China in early April. Raw Material Prices: Falling raw material prices are contributing to margin expansion in MDI markets.

Warning! GuruFocus has detected 8 Warning Signs with HUN.

Release Date: May 02, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Huntsman Corp (NYSE:HUN) is well-positioned to benefit from North American MDI tariffs, as it produces virtually all of its Americas material in North America. The company has seen stabilization and a 10% recovery in Chinese MDI prices, indicating potential market recovery. Huntsman Corp (NYSE:HUN) is focused on capitalizing on short-term changes and volatility, aligning costs to longer-term market realities, and exploring options to enhance its portfolio. The company has a strong balance sheet with $1.3 billion in liquidity and long-term debt maturities in 2029, 2031, and 2034. Huntsman Corp (NYSE:HUN) is actively pursuing cost savings, aiming to double its savings to $100 million, particularly focusing on calibrating its cost structure in Europe.

Negative Points

There is a significant disconnect between orders and downstream demand, with double-digit drops in some order patterns. The company is experiencing volatility in volumes and pricing, with uncertainty impacting customer confidence and inventory levels. Huntsman Corp (NYSE:HUN) faces challenges in the European market due to high energy costs, taxes, and regulation, affecting investment and profitability. The company is dealing with disruptions from planned turnarounds and unplanned outages, impacting EBITDA. There is uncertainty around the impact of tariffs and antidumping investigations on the North American MDI market, which could affect future demand and pricing.

Q & A Highlights

Q: Can you elaborate on the bullwhip effect and inventory levels in the current market? A: Peter Huntsman, CEO, explained that while there is a bullwhip effect, the guidance for the second quarter remains firm. He noted a disconnect between order patterns and actual production, particularly in the automotive and aerospace industries. Inventory levels are leaner, and the volatility is more pronounced on a monthly basis.

Q: How is the trade uncertainty impacting your long-term growth potential and asset footprint? A: Peter Huntsman, CEO, stated that the company's asset footprint is well-positioned for a protectionist world, with most products being domestically produced in North America and Asia. The biggest impact on earnings would be an improvement in North American residential and commercial construction.

Story Continues

Q: Can you provide an update on the spray foam business and its market conditions? A: Peter Huntsman, CEO, noted that the spray foam business is impacted by the slowdown in new home construction and home remodeling. Philip Lister, CFO, added that the company is consolidating operations to rightsize the footprint, including closing the Boisbury, Canada facility.

Q: What is the current status of MDI pricing in North America? A: Peter Huntsman, CEO, mentioned that while the company is pushing for price increases, the lack of volume and demand is a challenge. He expects that as tariffs take full effect and volumes recover, there will be opportunities for more meaningful price increases.

Q: How are you managing your MDI system given the reduced demand? A: Peter Huntsman, CEO, stated that the company is hoping for greater capacity utilization and expects demand for domestically produced MDI to pick up due to tariffs and changes in imports. The company is also consolidating operations to align costs with market realities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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