Reports Strong EBITDA Growth and Solid Free Cash Flow Generation
Third Quarter 2018 Highlights
- Adjusted EBITDA was $374 million compared to $340 million in the prior year period and $415 million in the prior quarter.
- Net loss of $8 million compared to a net income of $179 million in the prior year period and $623 million in the prior quarter. Adjusted net income of $202 million compared to adjusted net income of $164 million in the prior year period and $246 million in the prior quarter.
- Diluted loss per share was $0.05 compared to diluted income per share of $0.60 in the prior year period and $1.71 in the prior quarter.
- Adjusted diluted income per share was $0.84 compared to $0.67 in the prior year period and $1.01 in the prior quarter.
- Net cash provided by operating activities was $295 million. Free cash flow generation was $226 million.
- Balance sheet continues to strengthen with a net leverage of 1.3x.
- Completed cumulative share repurchases of approximately $175 million through the end of third quarter 2018.
THE WOODLANDS, Texas – Huntsman Corporation (NYSE: HUN) reported third quarter 2018 results with revenues of $2,444 million, net loss of $8 million, adjusted net income of $202 million and adjusted EBITDA of $374 million.
Peter R. Huntsman, Chairman, President and CEO, commented:
“This was a solid quarter overall for our Company, which demonstrated the consistency of our downstream and differentiated businesses. Expected adjustments to short term fundamentals in component MDI provided us an opportunity to show the strength of our unique downstream urethanes portfolio and strategy. In spite of the uncertainty around global trade and certain pockets of softer demand mostly seen in China, long term fundamentals remain intact. We are confident and on track to deliver on our 2020 targets that we laid out at our Investor Day on May 23, 2018. Our free cash flow remains strong with a good performance in the third quarter and our balance sheet continues to strengthen with net leverage improving to 1.3 times, well within investment grade metrics. We are committed to our balanced and opportunistic approach to capital allocation by growing our downstream differentiated portfolio of businesses and repurchasing shares to create long term value for our shareholders.”
Segment Analysis for 3Q18 Compared to 3Q17
Polyurethanes
The increase in revenues in our Polyurethanes segment for the three months ended September 30, 2018 compared to the same period of 2017 was due to higher average selling prices and higher sales volumes. Differentiated MDI average selling prices increased due to strong end-market demand, partially offset by a decline in component MDI prices compared to the prior year period. MTBE average selling prices increased primarily as a result of higher pricing for high octane gasoline. MDI sales volumes increased due to higher demand across most major markets. MTBE sales volumes increased due to the impact of hurricane related production outages during the third quarter of 2017. The modest increase in segment adjusted EBITDA was primarily due to higher MDI volumes and higher MTBE earnings due to hurricane related production outages in the third quarter of 2017, partially offset by lower component MDI marg ins.
Performance Products
The increase in revenues in our Performance Products segment for the three months ended September 30, 2018 compared to the same period of 2017 was due to higher average selling prices and higher sales volumes. Average selling prices increased primarily due to strong market conditions across several of our derivatives businesses and in response to higher raw material costs. Sales volumes increased primarily due to the impact of hurricane related production outages during the third quarter of 2017. The increase in segment adjusted EBITDA was primarily due to higher average selling prices, higher sales volumes and the impact of hurricane related production outages during the third quarter of 2017.
Advanced Materials
The increase in revenues in our Advanced Materials segment for the three months ended September 30, 2018, compared to the same period in 2017 was due to higher sales volumes and higher average selling prices. Sales volumes increased across most markets in our core specialty business as well as in our commodity business. Average selling prices increased in response to higher raw material costs, partially offset by the impact of a stronger U.S. dollar against major international currencies. Segment adjusted EBITDA remained flat primarily due to higher specialty sales volumes, offset by higher raw material and fixed costs.
Textile Effects
The increase in revenues in our Textile Effects segment for the three months ended September 30, 2018 compared to the same period of 2017 was due to higher average selling prices, partially offset by lower sales volumes. Average selling prices increased in response to higher raw material costs, partially offset by the impact of a stronger U.S. dollar against major international currencies. Sales volumes decreased primarily due to the impact from supp ly constraints in China, a de-selection of certain product ranges, and a temporary transition in distribution channels within a few regions. The increase in segment adjusted EBITDA was primarily due to higher average selling prices, partially offset by higher raw material costs, higher selling, general and administrative costs and lower sales volumes.
Corporate, LIFO and other
For the three months ended September 30, 2018, segment adjusted EBITDA from Corporate and other for Huntsman Corporation decreased $4 million to a loss of $47 million from a loss of $43 million in the same period in 2017, primarily due to an increase on LIFO inventory reserves.
Liquidity, Capital Resources and Outstanding Debt
During the quarter we generated free cash flow of $226 million compared to $227 million a year ago. As of September 30, 2018, we had $1,529 million of combined cash and unused borrowing capacity.
During the three months ended September 30, 2018, we spent $71 million on capital expenditures compared to $58 million in the same period of 2017. We expect to spend approximately $300 million to $320 million on capital expenditures in 2018.
Through the end of the third quarter 2018, we have spent approximately $175 million to repurchase approximately 5.9 million shares, including approximately $37 million spent to acquire approximately 1.3 million shares within the third quarter. As of the end of the third quarter 2018, we have approximately $825 million remaining on our existing multiyear share repurchase authorization.
Income Taxes
During the three months ended September 30, 2018, we recorded income tax expense of $27 million compared to $35 million during the same period in 2017. In the third quarter 2018, our adjusted effective tax rate was 20%. We expect our 2018 adjusted ef fective tax rate will be approximately 19% – 21%. We expect our long-term adjusted effective tax rate will be approximately 23% – 25%.
About Huntsman:
Huntsman Corporation is a publicly traded global manufacturer and marketer of differentiated and specialty chemicals with 2017 revenues more than $8 billion. Our chemical products number in the thousands and are sold worldwide to manufacturers serving a broad and diverse range of consumer and industrial end markets. We operate more than 75 manufacturing, R&D and operations facilities in approximately 30 countries and employ approximately 10,000 associates within our four distinct business divisions. For more information about Huntsman, please visit the company’s website at www.huntsman.com.
