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Huntsman's EPS Tops, Turns to Black

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Specialty chemicals company Huntsman Corporation’s (HUN - Free Report) third-quarter 2012 adjusted earnings of 70 cents a share topped the Zacks Consensus Estimate of 51 cents. On a reported basis, the company turned to a profit in the quarter boosted by improved results in the polyurethanes business and benefits from its restructuring measures. Huntsman posted a profit of $116 million (or 48 cents a share) in the third quarter versus a loss of $34 million or 14 cents per share a year ago. 

However, Huntsman’s revenues dipped roughly 8% year over year to $2,741 million and missed the Zacks Consensus Estimate of $2,883 million. Higher sales in the polyurethanes franchise was eclipsed by declines across performance products, advanced materials and pigments businesses. The company saw higher sales volume across all regions except Asia Pacific in the quarter.

The company’s restructuring efforts facilitated a 16% year-over-year improvement in its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to $401 million in the quarter. The restructuring actions are expected to result in an annual EBITDA benefit of more than $150 million by the end of 2013.

Revenues from Huntsman’s core Polyurethanes division rose 3% year over year to $1,244 million driven by higher average selling prices and better mix, which offset lower volumes and currency headwinds.

Performance Products segment sales slipped 12% year over year to $742 million due to lower volumes and average selling prices. A decline in raw material cost coupled with unfavorable currency translation led to lower pricing.

Revenues from the Advanced Materials unit fell 6% to $328 million as higher volume was more than offset by lower average selling prices. The company saw strong demand across Europe, the Americas and India and weakness in the Asia Pacific in the quarter. 

Textile Effects division’s revenues rose 5% to $182 million on higher share across major markets, especially Asia. However, selling prices declined due to negative currency impact. 

The company witnessed a 30% decline in revenues (to $319 million) in its Pigments segment in the quarter, hurt by lower sales volumes. Higher selling prices were neutralized by unfavorable currency swings.

Huntsman had cash and unused borrowing capacity of $1,038 million as of September 30, 2012, up roughly 1% year over year. Net debt was $3,236 million at the end of the quarter, down 11% from the prior-year quarter. The company prepaid senior secured term loans worth $75 million during the quarter.

Total capital spending for the third quarter was $85 million.  The company expects to spend roughly $425 million to $450 million on capital expenditures this year.

Moving ahead, Huntsman expects seasonal decline in demand in the fourth quarter. It envisions Pigments division's EBITDA to decline $100 million year over year in 2012.

Huntsman, which competes with The Dow Chemical Company and BASF SE (BASFY - Free Report) , currently carries a Zacks #3 Rank, reflecting a short-term (1 to 3 months) Hold rating.

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