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Huntsman Releases 2009 Second Quarter Results

Published on 2009-08-11. Author : SpecialChem

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008

Revenues for the three months ended June 30, 2009 decreased to $1,866 million from $2,896 million during the same period in 2008. Revenues decreased primarily due to lower sales volumes and lower average selling prices in all of our segments.

For the three months ended June 30, 2009, EBITDA was $874 million compared to $210 million in the same period in 2008. Adjusted EBITDA from continuing operations for the three months ended June 30, 2009 was $96 million compared to $210 million for the same period in 2008.

Polyurethanes

The decrease in revenues in the Polyurethanes segment for the three months ended June 30, 2009 compared to the same period in 2008 was primarily due to lower MDI sales volumes and overall lower average selling prices. MDI sales volumes decreased primarily due to lower demand in Europe and the Americas whereas sales volumes increased in Asia. Effects of the worldwide economic slowdown continue to affect global demand. MDI average selling prices decreased primarily due to competitive pressures, lower raw material costs and the strength of the U.S. dollar against the Euro. PO and MTBE sales volumes decreased as a result of the worldwide economic slowdown, while average selling prices decreased with lower raw material costs. The decrease in EBITDA in the Polyurethanes segment was primarily the result of lower MDI sales volumes partially offset by higher MTBE margins.

Advanced Materials

The decrease in revenues in the Advanced Materials segment for the three months ended June 30, 2009 compared to the same period in 2008 was due to lower sales volumes and lower average selling prices. Sales volumes decreased due to lower demand in all regions and across all major markets as a result of the worldwide economic slowdown. Average selling prices decreased primarily as a result of lower raw material costs in our base resins market and the strength of the U.S. dollar against major European currencies in our formulations and specialty components markets. The decrease in EBITDA was primarily due to lower sales volumes and higher restructuring costs, partially offset by lower raw material and operating fixed costs. During the three months ended June 30, 2009 and 2008, our Advanced Materials segment recorded restructuring and plant closing charges of $15 million and nil, respectively.

Textile Effects

The decrease in revenues in the Textile Effects segment for the three months ended June 30, 2009 compared to the same period in 2008 was due to lower sales volumes and lower average selling prices. Sales volumes decreased primarily due to lower demand for apparel and home textile products, as well as specialty textiles products in all regions as a result of the worldwide economic slowdown. Average selling prices decreased primarily as a result of the strength of the U.S. dollar against major European currencies, the Indian rupee and Brazilian real while average local currency selling prices were higher in Asia and the Americas. The decrease in EBITDA was primarily due to lower sales volumes and higher restructuring costs, partially offset by lower raw material and fixed costs. During the three months ended June 30, 2009 and 2008, our Textile Effects segment recorded restructuring and plant closing charges of $10 million and nil, respectively.

Performance Products

The decrease in revenues in the Performance Products segment for the three months ended June 30, 2009 compared to the same period in 2008 was primarily due to lower average selling prices and lower sales volumes. Average selling prices decreased in response to lower raw material costs and the strength of the U.S. dollar against major European currencies, and the Australian dollar. Sales volumes decreased across all product lines primarily due to the worldwide economic slowdown. The decrease in EBITDA was primarily due to lower sales volumes, partially offset by higher margins as raw materials costs fell faster than average selling prices.

Pigments

The decrease in revenues in the Pigments segment for the three months ended June 30, 2009 compared to the same period in 2008 was primarily due to lower sales volumes and lower average selling prices. Sales volumes decreased primarily due to lower demand in all regions as a result of the worldwide economic slowdown. Average selling prices decreased primarily as a result of the strength of the U.S. dollar against major European currencies while selling prices in local currency were higher. The decrease in EBITDA was primarily due to lower sales volumes and higher restructuring and plant closing costs partially offset by lower fixed costs. During the three months ended June 30, 2009 the Pigments segment recorded restructuring, impairment and plant closing costs of $30 million compared to nil for the same period in 2008.

Corporate and Other

Corporate and other items include the results of our Australia styrenics business, unallocated foreign exchange gains and losses, unallocated corporate overhead, loss on the sale of accounts receivable, income and expense associated with the terminated merger and related litigation, income and expense attributable to noncontrolling interests, unallocated restructuring costs, the extraordinary gain on the acquisition of a business and other nonoperating income and expense. For the three months ended June 30, 2009 the net effect of these items was income of $802 million compared to a loss of $54 million in the comparable period of 2008. The increase in EBITDA from these items was primarily the result of an $848 million increase in income associated with the terminated merger and related litigation ($844 million income in the 2009 period compared to $4 million expense in the 2008 period). Further, EBITDA increased as a result of a $3 million increase in income attributable to noncontrolling interests, a $13 million increase in unallocated foreign exchange gains ($7 million in gains in the 2009 period compared to $6 million in losses in the 2008 period), and a $6 million increase in earnings from our Australia styrencis business ($2 million earnings in the 2009 period compared to a $4 million loss in the 2008 period). The increases in EBITDA were partially offset by a $6 million increase in restructuring charges during the 2009 period and a $9 million gain on the Textile Effects Acquisition in the 2008 period.

Income Taxes

During the three months ended June 30, 2009, we recorded $311 million of income tax expense compared to $21 million of income tax expense in the same period of 2008. For the second quarter of 2009, we recorded tax expense of $313 million related to the $844 million of income related to the settlement of our litigation in Texas with Credit Suisse and Deutsche Bank. We expect to pay approximately $30 million in cash taxes primarily related to foreign taxable income from continuing operations in 2009, in addition to the estimated $185 million of cash taxes associated with the settlement of our litigation in Texas with Credit Suisse and Deutsche Bank.

Liquidity, Capital Resources and Outstanding Debt

As of June 30, 2009, we had $2,957 million of combined cash and unused borrowing capacity compared to $1,291 million at December 31, 2008. On June 22, 2009, we reached an agreement with Credit Suisse and Deutsche Bank to settle our claims against them in Texas state court for, among other things, fraud and tortious interference in connection with our terminated merger agreements with Basell and Hexion Specialty Chemicals, Inc. Under the terms of the settlement agreement, Credit Suisse and Deutsche Bank provided to us:

  • $632 million in cash
  • $500 million senior secured term loan financing, 7 year term at LIBOR + 2.25%
  • $600 million unsecured note financing, 7 year term at 5.5%

We expect to pay approximately $185 million of cash taxes associated with the bank litigation settlement.

Following the settlement, we redeemed all ($296 million principal amount) of our outstanding 11.625% senior secured notes due 2010 and all ($198 million principal amount) of outstanding 11.5% senior notes due 2012. The total redemption payments, excluding accrued interest, were a combined total of $509 million, including principal of $494 million and call premiums of $15 million. This debt reduction which will be reflected in our balance sheet as of September 30, 2009, eliminates all meaningful debt maturities until 2013. During the second quarter of 2009, our primary working capital (accounts receivable including our off balance sheet accounts receivable securitization program, inventory and accounts payable) decreased providing a cash benefit to us of $165 million. Total capital expenditures were $39 million during the second quarter of 2009 compared to $115 million for the same period in 2008. We expect to spend approximately $215 million on capital expenditures in 2009 compared to $418 million in 2008. In connection with our ongoing insurance claim related to the April 29, 2006 Port Arthur, Texas fire, we have received partial insurance proceeds to date of $365 million. We have claimed an additional $243 million plus interest as presently due and unpaid under our insurance policy as of June 30, 2009. We expect that the settlement of insurance claims will continue during 2009. Binding arbitration to settle these claims is expected to occur in November of 2009. Any additional anticipated recoveries are expected to be used to repay secured debt.

About Huntsman:

Huntsman is a global manufacturer and marketer of differentiated chemicals. Its operating companies manufacture products for a variety of global industries, including chemicals, plastics, automotive, aviation, textiles, footwear, paints and coatings, construction, technology, agriculture, health care, detergent, personal care, furniture, appliances and packaging. Originally known for pioneering innovations in packaging and, later, for rapid and integrated growth in petrochemicals, Huntsman has more than 12,000 employees and operates from multiple locations worldwide. The Company had 2008 revenues exceeding $10 billion.

Forward-Looking Statements:

Statements in this release that are not historical are forward-looking statements. These statements are based on management's current beliefs and expectations. The forward-looking statements in this release are subject to uncertainty and changes in circumstances and involve risks and uncertainties that may affect the company's operations, markets, products, services, prices and other factors as discussed in the Huntsman companies' filings with the U.S. Securities and Exchange Commission. Significant risks and uncertainties may relate to, but are not limited to, financial, economic, competitive, environmental, political, legal, regulatory and technological factors. In addition, the completion of any transactions described in this release is subject to a number of uncertainties and closing will be subject to approvals and other customary conditions. Accordingly, there can be no assurance that such transactions will be completed or that the company's expectations will be realized. The company assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by applicable laws.

Source: Huntsman


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