OK
The Universal Selection Source:
Coatings Ingredients
Industry News

Huntsman Releases Third Quarter 2006 Results

Published on 2006-10-30. Author : SpecialChem

THE WOODLANDS, Texas -- Huntsman Corporation

Highlights

  • Revenues for the third quarter of 2006 were $2,686.0 million, as compared to $2,587.9 million in the third quarter of 2005, an increase of $98.1 million or 4%.
  • During the third quarter of 2006, we entered into a definitive agreement to sell our European petrochemicals business to Saudi Basic Industries Corporation (SABIC) for $700 million in cash and the assumption of $126 million in pension liabilities. This transaction is expected to close by year end.
  • Third quarter 2006 net loss was $83.3 million or $0.36 loss per diluted share, due primarily to charges related to the sale of the European petrochemicals business. Excluding the impact of discontinued operations and other charges, adjusted net income from continuing operations was $87.3 million or $0.37 per diluted share. Adjusted net income from discontinued operations was $16.5 million or $0.07 per diluted share. The total of adjusted net income from continuing operations and discontinued operations for the three months ended September 30, 2006 was $103.8 million or $0.44 per diluted share compared to $0.34 for the same period in 2005.
  • The total of Adjusted EBITDA from continuing operations and discontinued operations for the three months ended September 30, 2006 was $303.5 million. Adjusted EBITDA from continuing operations does not include the operating results of the European petrochemicals business which has been reflected as a discontinued operation. For the three months ended September 30, 2006, the Adjusted EBITDA from discontinued operations was $43.5 million.
  • Third quarter 2006 Adjusted EBITDA from continuing operations does not include an estimated $66 million in lost margin due to business interruption related to the outage at our Port Arthur, Texas olefins facility, all of which is subject to reimbursement by our insurers in 2007.
  • Following the completion of the sale to SABIC, our net debt is expected to be less than $3.5 billion, a reduction of more than 40% as compared to the debt level at the end of 2004.

Peter R. Huntsman, President and CEO, stated, "In the third quarter, we continued to experience strong demand for many of our product offerings -- including MDI, where our sales volumes were up 16%, Performance Specialties, where our volumes were up 9% and Advanced Materials, where our volumes were up 5%, each as compared to the third quarter of last year. We expect this growth to continue into 2007, particularly in these and other products in our differentiated portfolio, where we are projecting meaningful earnings growth in 2007 as compared to 2006. In addition, the recent declines that we have seen in raw materials and energy prices, if sustained, will provide further opportunities to expand our margins across most product lines.

"The announcement of our agreement with SABIC to sell our European Base Chemicals and Polymers business marks a major milestone in our ongoing efforts to separate our commodity petrochemicals businesses from our portfolio of differentiated businesses. Following the completion of this transaction, together with our recent acquisition of Ciba's Textile Effects division and the sale of certain U.S. MTBE and butadiene assets to Texas Petrochemicals, our differentiated portfolio and is expected to comprise more than 70% of our revenues and more than 80% of our Adjusted EBITDA. In addition, the sale to SABIC will allow us to reduce our total debt to below $3.5 billion, which is more than 40% lower than our debt level at the end of 2004.

We compute Adjusted EBITDA from continuing operations to eliminate the impact of losses on the sale of accounts receivable related to our securitization program, legal and contract settlements, losses on early extinguishment of debt, loss due to the Port Arthur outage (write off of assets), restructuring, impairment and plant closing costs (credits), gain on dispositions of assets, discontinued operations, extraordinary gain on the acquisition of a business, and the cumulative effect of changes in accounting principle in order to provide investors with a more meaningful measure of our operational performance. We compute adjusted net income from continuing operations by eliminating the after tax impact of preferred dividends, legal and contract settlements, losses on the early extinguishment of debt, loss due to the Port Arthur outage, restructuring, impairment and plant closing (credits) costs, gain on dispositions of assets, discontinued operations, extraordinary gain on the acquisition of business, and the cumulative effect of changes in accounting principle. See footnote (7) at the end of this press release for more information on EBITDA, Adjusted EBITDA and adjusted net income.

Three Months Ended September 30, 2006 as Compared to Three Months Ended September 30, 2005

Revenues for the three months ended September 30, 2006, increased to $2,686.0 million, from $2,587.9 million during the same period in 2005. Revenues increased in our Polyurethanes, Performance Products, Pigments, and Polymers segments due primarily to higher average selling prices. Revenues increased in our Materials and Effects segment primarily due to the addition of the recently acquired Textile Effects business. Revenues decreased in our Base Chemicals segment primarily due to lower sales volumes resulting from the outage at our Port Arthur, Texas olefins manufacturing facility and the divestiture of certain of our U.S. butadiene and MTBE business assets.

For the three months ended September 30, 2006, we generated EBITDA of $112.6 million, which compares to EBITDA for the three months ended September 30, 2005, of $202.4 million. Adjusted EBITDA from continuing operations for the three months ended September 30, 2006 was $260.0 million, a decrease compared to $318.8 million for the same period in 2005.

Polyurethanes

The increase in revenues in the Polyurethanes segment for the three months ended September 30, 2006 compared to the same period in 2005 was primarily due to higher MDI sales volumes, partially offset by lower average selling prices. MDI sales volumes increased 16% as a result of continued strong demand in all geographic markets, particularly in Asia, partially offset by a 3% decrease in MDI average selling prices due to new industry capacity. MTBE selling prices decreased sharply due to changes in U.S. legislation and reduced U.S. demand.

The decrease in EBITDA in the Polyurethanes segment was primarily the result of lower MTBE margins and lower margins due to higher raw material costs. During the three months ended September 30, 2006 the Polyurethanes segment recorded restructuring and plant closing costs of nil compared to $0.9 million for the comparable period in 2005.

Materials and Effects

The increase in revenues in the Materials and Effects segment for the three months ended September 30, 2006 compared to the same period in 2005 was primarily due to the acquisition of the textile effects business on June 30, 2006. The textile effects business contributed $227.6 million in revenue for the three months ended September 30, 2006, while the advanced materials business revenues for the same period increased by $34.0 million or 12%. The increase in advanced materials revenues was primarily the result of a 5% increase in sales volumes due to stronger demand in our coatings, construction and adhesives business unit and in our power and electronics business unit.

The increase in EBITDA in the Materials and Effects segment was primarily due to the acquisition of the textile effects business on June 30, 2006. The textile effects business contributed $6.8 million in EBITDA for the three months ended September 30, 2006, while the advanced materials business EBITDA decreased $2.6 million compared to the same period in 2005. The decrease in EBITDA in the advanced materials business was primarily due to higher SG&A and other business support costs. During the three months ended September 30, 2006 the Materials and Effects segment recorded restructuring and plant closing credits of $1.4 million compared to nil for the comparable period in 2005.

Performance Products

The increase in revenues in the Performance Products segment for the three months ended September 30, 2006 compared to the same period in 2005 was primarily the result of a 16% increase in average selling prices, partially offset by a 13% decrease in sales volumes. Average selling prices increased in response to higher raw material and energy costs and strong market conditions for our performance specialties products. Sales volumes decreased primarily due to reduced sales of ethylene glycols and certain surfactants.

The increase in EBITDA in the Performance Products segment was primarily due to the receipt of $6.0 million in the 2006 period of insurance proceeds related to property damage incurred as a result of the U.S. Gulf Coast storms of 2005, and lower restructuring expenses. During the three months ended September 30, 2006 the Performance Products segment recorded restructuring and plant closing costs of $1.1 million compared to $5.3 million for the comparable period in 2005.

Pigments

The increase in revenues in the Pigments segment for the three months ended September 30, 2006 compared to the same period in 2005 was primarily due to a 3% increase in average selling prices and a 5% increase in sales volumes. Average selling prices increased primarily in Europe and the Asia Pacific regions due to stronger demand and higher industry utilization rates. Sales volumes increased primarily due to stronger demand in Europe.

The increase in EBITDA in the Pigments segment was primarily the result of a decrease in restructuring, impairment and plant closing costs, partially offset by higher raw material and manufacturing costs. During the three months ended September 30, 2006, the Pigments segment recorded restructuring and plant closing credits of $0.2 million compared to charges of $9.6 million for the comparable period in 2005.

Polymers

The increase in revenues in the Polymers segment for the three months ended September 30, 2006 compared to the same period in 2005 was primarily the result of a 14% increase in average selling prices in response to higher raw material and energy costs. Sales volumes decreased 6% primarily due to reduced customer demand for polyethylene and polypropylene.

The increase in EBITDA in the Polymers segment was primarily the result of a decrease in restructuring, impairment and plant closing costs. In addition, margins were lower in polypropylene and expandable polystyrene as raw material price increases outpaced increases in average selling prices. During the three months ended September 30, 2006 the Polymers segment recorded restructuring, impairment and plant closing charges of $0.7 million compared to $48.4 million for the comparable period in 2005.

Base Chemicals

The decrease in revenues in the Base Chemicals segment for the three months ended September 30, 2006 compared to the same period in 2005 was primarily the result of lower sales volumes resulting from the outage at our Port Arthur, Texas olefins manufacturing facility and the divestiture of certain of our U.S. butadiene and MTBE assets.

The decrease in EBITDA in the Base Chemicals segment was primarily the result of the $161.2 million asset impairment recorded in discontinued operations related to the pending sale of our European Base Chemicals and Polymers business and an estimated $66 million in lost margin due to business interruption related to the outage at the Port Arthur, Texas olefins facility. During the three months ended September 30, 2006, the Base Chemicals segment recorded restructuring, impairment and plant closing credits of $4.7 million compared to charges of $2.4 million for the comparable period in 2005.

Corporate and Other

Corporate and other items include unallocated corporate overhead, loss on the sale of accounts receivable, unallocated foreign exchange gains and losses, losses on the early extinguishment of debt, other non-operating income and expense, minority interest, unallocated restructuring and reorganization costs, extraordinary gain on the acquisition of a business, and the cumulative effect of change in accounting principle. In the third quarter of 2006, the total of these items improved by $36.8 million compared to the 2005 period. The improvement primarily resulted from a decrease in expenses of $26.9 million related to the loss on early extinguishment of debt, an increase of $16.8 million in unallocated foreign currency gains, and an extraordinary gain of $7.2 million related to the acquisition of our textile effects business, partially offset by a charge of $20.0 million for the impairment of assets in connection with the announced sale of our European Base Chemicals and Polymers business.

Liquidity, Capital Resources and Outstanding Debt

During the third quarter we redeemed all of our $100 million outstanding senior floating rate notes due 2011 with borrowings under the expanded term loan B portion of our credit facilities. In addition we repurchased and redeemed $200 million of our 9.875% senior notes due 2009 and repaid $50 million of our term loan B loans using available liquidity including from cash, borrowings under our revolving facility and issuance of commercial paper under our off balance sheet accounts receivable securitization program.

We expect to complete the sale of our European Base Chemicals and Polymers business during the fourth quarter of 2006 conditioned upon receipt of necessary regulatory approvals and other customary closing conditions. We intend to use net proceeds from the sale to redeem in full the remaining $250 million outstanding principal amount of our 9.875% notes due 2009 and to repay a portion of our credit facilities.

As of September 30, 2006, we and our subsidiaries had approximately $809 million in combined cash and unused borrowing capacity.

For the nine months ended September 30, 2006, total capital expenditures were approximately $327 million compared to $202 million for the same period in 2005. The increase in capital spending is primarily attributable to capital expenditures on our Wilton, U.K. LDPE facility of approximately $130 million compared to approximately $17 million for the same period in 2005. Excluding capital expenditures that will be required to repair our Port Arthur, Texas olefins facility, we expect to spend approximately $500 million on capital projects in 2006, including approximately $200 million in capital expenditures on our LDPE facility at Wilton, U.K.

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 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. Accordingly, there can be no assurance 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 securities and other applicable laws.

Source: Huntsman


Halcyon Group 3rd R&D Innovation Summit
Channel Alerts

Receive weekly digests on hot topics

Back to Top