Huntsman Corporation Aktie

Welcome to the Huntsman's Second Quarter 2026 Earnings Conference Call. [Operator Instructions]

Please note that this conference is being recorded. I will now turn the conference over to Ivan Marcuse, VP of IR and Corporate Development. Thank you. You may begin.

Thank you, Daryl, and good morning, everyone. Welcome to Huntsman's Second Quarter 2016 Earnings Call. Joining us on the call today are Peter Huntsman, Chairman, CEO and President; and Phil Lister, Executive Vice President and CFO. Yesterday, July 30, 2026, we released our earnings for the second quarter 2026 via press release and posted on our website, huntsman.com. We also posted a set of slides and detailed commentary discussing the second quarter 2026 on our website.

Peter Huntsman will provide some opening comments shortly, and we will then move into the question-and-answer session for the remainder of the call. During the call, let me remind you that we may make statements about our projections or expectations for the future. All such statements are forward-looking statements, and while they reflect our current expectations, they involve risks and uncertainties and are not guarantees of future performance. You should review our filings with the SEC for more information regarding the factors that could cause actual results to differ materially from these projections or expectations.

We do not plan on publicly updating or revising any forward-looking statements during the quarter. We will also refer to non-GAAP financial measures such as adjusted EBITDA, adjusted net income and free cash flow. You can find reconciliations to the most directly comparable GAAP financial measures in our earnings release, which has been posted to our website, huntsman.com.

I'll now turn the call over to Peter Huntsman, our Chairman and CEO.

Ivan, thank you very much, and thank you, everybody, for taking the time to join us this morning. It's been 3 months since the last time we were able to report on market conditions and what we were doing as a company to enhance shareholder value. Needless to say, it has been a rather busy few months on a number of fronts. I'd like to comment on a few things, but I plan to be brief as your questions and comments for the reason for this call.

I stated during our last quarter's call that while I was heartened to see the prices and margins were improving across most of our product lines, I emphasize the need for "stable and long-term demand trends to continue". While we improved our margins from the first quarter, I remain concerned as to the growth rates and consumer confidence that we are saying.

Since our last call, North American housing stats have softened and Chinese consumer confidence continues to languish. Europe continues its ill-fated energy policy and all that free wind is now costing European consumers and industry near-record amounts. As ongoing conflicts in the Middle East seemingly move weekly from ceasefire to all-out war, moving energy prices, stock markets and consumer sentiment with each action, we continue to keep a wary eye on inflation and consumer spending, especially on durable goods. It seems much of this turbulence will continue through the third quarter.

While this is playing havoc on cost and order patterns, it is also demonstrating the value of reliable supply lines contractual assurance of supply and the value of pricing and consistent quality. We will continue to push for greater margins as we believe that this industry still has a lot of room for improvement.

In the -- on the 16th of June, we announced a merger of equal with Olin Corporation. Since that time, we've had the opportunity to visit one-on-one with the majority of our largest shareholders. If I had to summarize my feelings towards this transaction, it would be in the answer that I shared when I was asked if I could do anything different than what had been done. My response was that I wish I had met Ken Lane a year earlier and that we were here today earning materially more than we otherwise would be earning. Regardless of market conditions, whether they improve or continue to languish, our company and shareholders will be better off with this proposed merger. If this transaction was a year behind us, we would be today, well on our way to achieving an additional $300 million in synergies.

We would be earning more through new found commercial opportunities that are not even part of our $300 million in synergies. We would have a stronger balance sheet that would be improving quarter-by-quarter. In short, should today's market conditions continue through next year, we will be better off than we are today. Should markets improve, we will be the benefactors of not only the forthcoming synergies, but also higher combined volumes and greater integration.

Either way, this positions us to improve regardless of market conditions. I have been impressed with the strong collaboration and interaction between the Huntsman and Olin teams that are advancing our closing at a rapid pace. Our teams will be ready on day 1 of closing to commence with achieving our outlined synergies. Between now and closing, we will continue to focus on creating as much shareholder value as possible. Following the completion of this transaction, we'll be able to achieve far more.

Operator, with that, we'll open the line up for any questions and comments.

[Operator Instructions] Our first question has come from the line of Frank Mitsch with Birmingham Research.

I was wondering if you could update us on the state of the business from a demand and a supply standpoint, particularly on the supply side, given what's been going on with the Iranian conflict. How do you see that -- how did you see that impact 2Q? What are your expectations for 3Q and beyond?

Well, I think on 2Q, we had the ability to be able to put prices up. Much of that was to recover the increased of raw materials that we were seeing at the time, but we were also able to get ahead as our results indicate that we've nearly doubled our EBITDA since second quarter of last year. Look, on a supply basis, we obviously have a large global MDI plant that is on the wrong side of the trade of 4 moves, I would say. And that is probably representing somewhere around 4% of industry average.

So from a supply point of view, Frank, I think that it's pretty well balanced. My disappointment, if I have one, is that we're not seeing greater demand and greater improvement in the macroeconomic situation. I don't want to be overly dire on this. I'm just saying that yes, on the supply side, I think it's pretty well balanced. On the demand side, I'd like to see a little bit more. Right now, depending on where you are around the world, you're probably see anywhere from 0% to 2% very low single-digit sort of growth that is taking place. So an improved economy, improved housing demand, particularly in North America would be very helpful, return consumer confidence in Asia would be very good to see. And frankly, improved sentiment -- consumer sentiment and lower energy inflation in Europe, I think would all be benefactors this time.

I hear you. Obviously, the PMIs have actually ticked positive. So that's on the plus side of the equation. But if I could also -- other than what would you do differently? What else have you been hearing from investors regarding the Olin merger or probably said a different way, what might be the investment community be missing given on how the shares have been trading?

I'm not sure that the investment community is missing a whole lot as much as this industry is -- I'll borrow the -- what is the Missouri that's a show me state. I think that once you can actually get a transaction closed, show me that you're going to get the synergies that you said you're going to get on a timely basis, show me the difference of what 2 companies together, 1 in 1 adds up to 3. Show me this, and I'll reward you with the commensurate results. And I think that the market feedback that I personally am getting is that this makes sense. I like the integration. Let's remember that chlorine and the entire line of raw materials that we're presently buying from chlorine to caustic to epi to LER to EDC, this is the only major supply chain at every single one of the divisions within Huntsman consumes today. and it affects every one of our businesses.

We have -- we really have a material opportunity here to improve our economics and to be more competitive on a global basis. And as we see the results of this coming through, I think that the market will be very quick and will be very generous in the reward.

Our next questions come from the line of Josh Spector with UBS.

I wanted to ask on Advanced Materials. I mean you called out some pull forward, and I don't think you actually sized it specifically in the quarter. I'm curious if you could give a comment on that. And it seems like you're assuming that unwinds in 3Q. Just trying to understand some of the phasing there are a bit better.

Sorry, when you say the pull forward into Q2.

Yes.

So Josh, it was a little bit of -- it was a little bit in the aerospace segment where we saw where I think they were getting their supply chains. They just wanted to be more secure there. So you saw I gauge it at a couple of million.

Yes. I think we're talking about low singular millions of dollars there. Sorry, I thought we were actually moving material volumes there or something. No, that will be a de minimis impact.

Okay. And just, I mean, similarly, within that segment, as you look at some of the upstream costs going down, I'm just wondering around some of the timing impacts. Is that something that helps your margins into 3Q? Or is it all relatively quick?

I think it's -- I mean, we respond pretty quickly. We've got low inventories on raw materials. Typically, what we see the raw material movements we see in that industry, it comes through pretty quick. I would say that our biggest impact in Q3 is going to be a basis of what we do in pricing and what we see in demand. more so than raw material movement.

Our next questions come from the line of Hassan Ahmed with Alembic Global.

First question on polyurethanes. Obviously, a lot of stuff moving around. I mean we've seen some TDI outages. I would imagine that may result in some incremental demand on the MDI side of it, then we've obviously seen some outages in MDI itself. So just in terms of effective utilization rates, where do you see the industry and should it be relatively snug over the next quarter or 2? And part and parcel with that, I know you guys have taken some pricing actions in Europe in particular. But obviously, nat gas prices, they continue to rise. So I mean, will you guys be EBITDA positive over there after the price acres? And will the industry over there be EBITDA positive as well.

Well, if I had -- Hassan, thanks very much. Good question. If I had to look at the market today in the snapshot, I would say that, yes, Europe with the pricing actions and with the cost that we have, Europe should be positive as we look into the third quarter. Now again, over the last couple of weeks here, and I'm talking the last 2 or 3 weeks, I've seen gas in Europe go from about $13, $14 per MMBtu rise above $20 per MMBtu. Now should it continue to do that, should electricity continue to rise at these rates. I don't believe that will be the case. But if they were to continue, that obviously is going to pose some headwinds. That's my biggest concern around Europe right now on a macro basis or energy costs and overall consumer demand. It's tough to get prices up when you see demand going down and -- or languishing and people are obviously fighting over a shrinking pie.

So as I think about Europe, I continue to be optimistic that we will be EBITDA positive in the third quarter there. As you look at it on a macro basis, I would imagine without looking at industry data because there's not a whole lot that's published, we're probably operating in a capacity utilization rate somewhere in the mid-80s on a global basis.

Some areas, I think in the U.S., it's tighter than that. I think in Europe, it might be a little looser than that. Asia is probably right on top of that. There have been a number of outages that are around. And again, if demand were rising at traditional levels of 4% to 6% per annum sort of growth rate, I think you'd see much tighter markets in today.

Understood. And as a follow-up on the merger with Olin, again, going back to the question around your conversations with investors, I mean, are you getting any pushback on the cost synergy numbers. And again, I just wanted to sort of seek some clarification around that. I mean, at least in my mind, part of the cost synergy is obviously the integration of chlorine into your polyurethane asset base, but also part of the synergy -- cost synergy would be the incremental caustic that would sort of be sort of produced as a result of Olin taking up those operating rates to feed into your polyurethane system. So I mean, -- are you sort of seeing investors sort of question that? Or I mean, is there some confusion around that?

No. I think, Hassan, I think it's a very good and fair question. I think that our industry is notorious for cost savings that don't always fall to the bottom line. And you see these massive cost-saving programs that are initiated over a 2- or 3-year period. In the end the 2- or 3-year period, you're kind of asking yourself, well, which 1 was it? Either the industry collapsed or you've got 0 cost savings because I don't really see a whole lot of difference in the bottom line.

One of the things that literally in our very first conversations that Ken and I had on a one-on-one basis. This was something that was very important. If we're going to -- if this deal is going to go forward, we're going to have to have real substantive synergies that make sense. We got our senior teams together. They've met multiple times on a face-to-face basis on an ongoing basis over the last couple of months. And we have a bucket of about $300 million, say that $75 million of that is purchasing logistics. That's pretty straightforward.

You get your purchasing people together. They're buying products. We're buying products. Many of those are the same products. who's buying at a better rate, great. You've got a cost savings there. We look at the overlap between our Epoxy businesses. We think that the combination of the two businesses coming together make for a a stronger, a more competitive, a more capable company that is able to compete on a global basis. But you've also got overlapping areas where you have an opportunity to become more efficient there. That was approximately another $75 million.

That also included between those 2 areas that also included Avid integration that comes by consuming more chlorine more chlorine, more LER more EDC. And as you do that, you're obviously producing and generating internally more caustic credit for that. So that's kind of the 2 buckets of $75 million. And then you've got a $150 million of SG&A. Obviously, the combined companies don't need don't need 2 CEOs. Obviously, we don't need 2 CFOs. We don't need 2 independent Board of Directors and the associated cost filings 2 audits to this and as you start going through all of that, we think that $150 million was a number that was imminently achievable and that after a 2-year basis, the vast majority of these savings would be incurred.

Now there's another $100-plus million dollars and I say plus because that's just not only chlorine savings, but it's also caustic value that's generated from that coin savings. And that's merely a contract that exists with a chlorine supplier today that is not land, obviously, Huntsman will continue to honor that contract, and Olin Huntsman will continue to honor that contract through its duration.

When it is complete, we will be supplying that internally -- and we believe that, that will be the benefit that will come from that. So it's very straightforward. It's just a question of opening up a valve through an existing pipeline through a system that we've used in the past, and be able to take advantage of that. So the $300 million of synergies, plus another $100 million that is the replacement. And none of that, did I outline any commercial opportunities wherein by being more competitive,by having a more competitive cost basis that we're able to go out and get new customers and we're able to take our technologies of both companies coming together and capitalize on that. So again, I believe that in order to have the full benefit of these synergies you're going to have to offset on an ongoing basis, your inflation pressures on your cost system. And when you can demonstrate that you truly have a combined package of $400 million of synergies, you're able to have the integration, you're able to have the new commercial opportunities. You're able to have your ongoing efficiency programs to offset inflation in addition to the synergies that I've just outlined.

That's what will fundamentally make what I believe, when I say 1 and 1 makes 3. The EBITDA benefit from that, the multiple on that will create roughly the value of a stand-alone Huntsman or a stand-alone Olin today. And you're essentially creating an entity of through those cost savings that is equal to either one of us on a stand-alone basis. So I'm sorry, that was way long of an answer here, but it's one that I think that people are rightly focused on. It's 1 that people should rightly be focused on and should be questioning. And it's one that we feel very confident that from day 1, we've been able to have these as a bottom-up number and calculation and not just some third-party consultants coming in and saying, let's pick 5% or whatever of your revenues, and that should be your target.

Our next questions come from the line of Matthew DeYoe with Bank of America.

Good morning, everyone. Can you talk to the potential impacts of the antidumping duties on U.S. MDI and whether you think that lends to a higher floor over time for that business, what that floor could ultimately look like?

I think that -- well, what the floor to looks like. I don't want to -- I wouldn't speculate on that, not that I'm trying to avoid an answer as much as I just simply don't know, but it ought to be better than where we were a year ago. But let's also be honest, I believe that you're going to need demand to pick up.

You're going to need housing to get back to a more normalized run rate to see any real material benefit come from this. And let's remember, there's a lot of MDI that's exported from the United States. It goes into Canada that goes into Mexico. It goes into Latin America and so forth.

There are still imports from around the world that are going into those regions. And for every ton that goes into those regions and pushes U.S.-produced MDI back from those regions back into the United States market. I mean, we say that, that export-oriented MDI is not coming to the U.S., but it kind of is in a roundabout way, right? And so I think that a lot of people were expecting as soon as this was implemented and put into place, you're going to see a benefit the next quarter.

Now this is something that will play out over a multi-quarter basis. And you'll see the greatest benefit of this come about when demand returns and housing returns to a more normalized basis.

Appreciate the answer, Peter. And I've been jumping around a little bit, so I apologize if I missed it, but polyol pricing was pretty strong in the quarter. You had an outage, obviously, 1 of the large competitors, which tightened a fair amount of the market. What was the benefit there? What does that look like in 3Q, 4Q? How is that market managing all that because we also heard some customers on the coating side talking about these shortages domestically as well.

I wouldn't say that it was -- I heard a lot more horror stories and I think actually happened to the industry. Look, our impact and benefit would be in the low $2 million to $3 million sort of a range -- so yes, I'm not sure that it was as big of a deal as some maybe put it out in the media.

And just as a reminder, Matt, obviously, the upstream outages are over in quarter 3. So product is in the -- coming back into the market there.

Our next questions come from the line of David Begleiter with Deutsche Bank.

Peter, U.S. MDI supply disruptions in Q2 helped you guys as these disruptions come back online in Q3. If that were to quantify the impact to you guys quarter-over-quarter?

Yes. I'm -- we -- I wish I could say that we had 100% operating rates during the quarter as well. we had some minor issues, I believe that were reported. But I think across the industry going from second quarter into third quarter, there's quite a bit of inventory going into second quarter. That was built up for a housing season that really didn't take off as much as probably some anticipated. Bottom line, I don't see a whole lot of impact with those restarts going into the third quarter. It looks like it's pretty flat from a demand -- or from a supply/demand basis.

Got it. And in the filing, you guys put out, you did provide some projections specifically 2027 relatively $500 million, could you talk to that projection? And I know things have constantly changed here, but maybe how you think about that number sitting here today?

Yes, David, it's Phil. Yes, as we put the other projections and we looked out through the time period for the for the S-4, we assumed a continued improvement in economies around the world. pickups in construction, nothing significant. Housing not moving back up to 1819,butfairly fairly moderate improvements in housing activity as you move from 26 into '27, continued improvements in our power, our aerospace businesses in Advanced Materials and in general, sort of a moderate improvement as we move towards what we call sort of more cycle average earnings as you move through 2028.

Our next questions come from the line of Kevin McCarthy with Vertical Research Partners.

Peter, I'd welcome any thoughts that you might have on the month of July and how that compared to the second quarter average. And in particular, I think what I'm trying to gauge is as you offer the guidance that you did on Slide 13, do we need any sequential improvement between July and September to achieve the midpoint of that range or not?

Yes. Good question, Kevin. I think that as I look at the results of July and I look at the order patterns going into September, I think it's -- if I describe it as simply as possible, it's stable. And I think we're kind of looking at the third quarter to be that. And my -- I think that we try to say there's as much tailwind is there a headwind and I think that we've -- who where I sit today, again, all of that can come apart with all the actions were going on in the world, but it feels pretty stable right now.

Okay. And then if I may, your Advanced Materials volume. It seems like it's on a pretty good track at 8% growth in the second quarter. Can you comment on the aerospace piece of that segment and maybe the non-aerospace piece and kind of how you see the trajectory in the back half?

I would say that the business right now has a rising tide across all of our applications, but there are 2 that are probably, I would say, rising a little bit faster than the others. The first of those would be power. And when I talk about power, that's not electronics. That's power in the grid system. So you think about all of these -- I'm going to say something favorable here about wind energy. So listen up.

So you think about all these wind mills that all need to be interconnected that's actually great. So you kind of got the spider web of power lines that are connecting all of these things, and as you think about that, that power grid system needs to be improved with the renewable or alternative energy. Power is also being built out going into AI. And the third area is power is also -- we're relying on a fast-growing AI alternative energy system. That's built largely around a 30- to 50-year old infrastructure.

So you're modernizing, you're expanding and you've also -- AI is impacting power. So I give a shout out to power. Aerospace, for us, I want to just emphasize, we are still -- when we think about wide-bodies. Wide-body on a per plane basis, widebody is our bread and butter in Advanced Materials on the composite side. So when you think about the material that's going into wings and fuselages and so forth, the build rate on widebodies, I'm talking specifically about 777, 787 and Airbus 350s we are still not back to pre-COVID 2018, 2019 sort of build rates.

What we are seeing in aerospace, we are seeing that recovery continue, a, but b, we're seeing a number of new applications. So interior parts and so forth, we're seeing aerospace adhesions and what have you. And that area for us is growing faster than is the composite. Now I expect the composite to continue to recover. So aerospace for us is -- will continue to be a strong recovery story and also new application story.

And bear in mind that for us, usually, second quarter is usually a stronger month in aerospace. It's not -- I wouldn't say it's typically seasonal. It seems like people store up at the beginning of the year and build out throughout the year. So that's usually the case. And the rest of the business, I would say, in Advanced Materials when we're looking at coatings, looking at construction, looking at automotive, all of those feel like they're all pretty much tracking PMI. I would just say that we are seeing a little bit better growth than what I would say would be inflation or PMI growth in automotive as well. Some new applications, particularly in EVs. We've talked about these in the past, where we qualified for applications a year ago, 6 months ago and so forth.

We're now starting to see the build rates of those hitting the market. So we talked up these things a couple of quarters ago. We're actually starting to see that on the automotive. So in Advanced Materials, automotive is another area where we're seeing stronger than kind of expected growth.

Our next questions come from the line of Matthew Blair with Tudor Pickering Holt and Co.

Thanks and good morning, Peter. Would you say that spray filing is holding up relatively well despite the tough construction environment. I think the prepared remarks mentioned some new wins in select markets. Could you elaborate a little bit more on that?

Yes. I think that the spray foam, we've got excellent leadership in spray foam that's done a phenomenal job and looking and making their supply chain more efficient, their cost better. And most importantly, their marketing and their sales have been very effective in a lethargic construction environment. We're seeing low double-digit growth continued to consistently take place. in spray foam energy efficiency. I think that I'm a bit disappointed as to where we were 2 years ago in that business. But I look at where we are today and they're hitting on all cylinders. They're doing a great job. So it's been a great business for us.

Sounds good. And then I guess this might be for Phil. But any estimates on what net leverage would look like by the end of the year? I think you showed a pretty good improvement in the second quarter down to $5.4 million from 6.1% in Q1. Do you think something around the range of 3.5 to 4x net leverage by the end of 2026 as possible?

Yes. So you're right, Matt. We went from 6 5, 4, down to with a net debt level of approximately $1.7 billion. Obviously, that was with kind of a seasonal cash outflow in the first half of the year, I'd expect certainly a cash inflow in the second half of the year to help that net debt number. And yes, you should be moving more towards that sort of 4x net debt leverage ratio as you progress through the second half of the year.

Our next questions come from the line of Abigail Eberts with Wells Fargo.

Again, trying to focus on the positives and polygons. Can you speak to the underlying trends driving the growth in the industrial side of the market that you're seeing?

Yes,Bige, thank you very much. As we think about the industrial growth for us, that mostly our elastomers business, smaller volumes but much better margins there. And as we see that on a second quarter versus the prior year. in our lasers business were up double digits in Asia, Europe and in the Americas. So again, that's going to be a lot of your coatings, a lot of your specialty coatings, adhesives and so forth. Think about when you put coatings on the back of a pickup truck and you're looking at industrial coatings. So these are fast-growing markets. We've got great innovation in these areas and a strong customer base.

Our next question has come from the line of Arun Viswanathan with RBC Capital Markets.

Yes, I just wanted to go back to the supply/demand in MDI and we are seeing some continued -- would you characterize the market still in slightly oversupplied situations? And is that mainly rectified through demand improvement? I think you referenced that earlier, but -- are there any supply actions that you think would be required at this point?

No, I think -- I believe that it's pretty well balanced. There's not a lot of new capacity that's come on. Industry -- look, the industry continues to grow, but it's just growing at a much slower pace than it has in years past. And what it means is North American housing durable goods. It needs Asia domestic economy to come back and European consumers to return.

And then I guess when you look out into downstream spray foam and maybe some of the system houses capacity that you have, would you also characterize that as balanced? And does that -- and are tight and does that lead to potentially some some greater pricing opportunities downstream, but is it the case that you're just not able to take advantage of that because of weak demand as well.

Yes. I think those areas continue to be well balanced. Look, it's always a -- as you go further downstream, there's always plenty of competition. And you're always in a race to make sure that these products are commoditized as you've got a healthy supply chain of new products, new ideas, new innovation. And I think that we do a good job in that area. But it's a good balance, I think, between -- as things go commodity and as you have new opportunities and new innovation going in.

Our next question comes from the line of Mike Harrison with Seaport Research Partners.

Wanted to ask about polyurethanes pricing in the Americas. Can you give us a sense of what portion of your contracts turn over every quarter -- and are there any actions that you can take to maybe work around the contract structure, things like her charges? Or is there some kind of an opener that would allow you to renegotiate the terms.

Yes. About 40% of our contracts are formula, meaning that they're going to be on a longer than a quarter-to-quarter basis. Now those open up on anywhere from every 6 months, every 12 months where you can renegotiate what you're charging somebody. But those are designed to be able to take in and absorb benzene and natural gas prices and so forth. So as you think about that, about every 6 to 12 months, most of these contracts will have a pit stop where you can pull over and renegotiate, if you will. -- which not a big fan of either of those, I'd rather have it where we can move prices instantaneous with market conditions. But -- we are where we are in polyurethanes that's largely dictated by competition.

But yes, we are aggressively moving on surcharges on everything and everywhere that we can. And at the same time, we also want to make sure that as you think about your customer relationships that you're taking care of your customers because if you're taking advantage of them today, the table turn pretty quickly in this industry. So yes, we do on our contracts. We do on our pricing formulas that we entered into. It doesn't mean I'm always happy with those, but it is what it is.

And then I was hoping you could also provide some more color on how the situation in the Middle East is impacting your PO MTBE business in China. It looks like there was a nice benefit in the second quarter. And I'm just curious, would you expect the third quarter benefit to be greater than what you saw in Q2?

I think you're probably going to be flat Q2 to Q3. A lot of the gasoline supplies oxygenated levels and values and so forth. To some degree, those are going to be government dictate. And so it's not as free-flowing. I would say, as you would see in the Americas or even in Europe. But I'd say, from Q2 to Q3, it's going to be flat.

Our next questions come from the line of John Roberts with Mizuho Securities.

Do you think your deal with Olin will cause your current chlorine and EDC suppliers to deal with Huntsman differently until you can switch over?

I certainly wouldn't expect them to. We've got contracts that we're honoring and I know most of the leadership of those companies do an honor those contracts as much as we do. I don't see anything there that would change the outlook at all.

Do the contracts at least go out as far as until you can do the switchover?

The -- yes. So I mean we -- I mean I wish they weren't going to ask as long as they are, but as I said earlier, those contracts will be honored. And the longest -- the largest and longest contract that we have in the Americas is the 1 that I made reference to earlier that end at the end of 2030.

But as we said, John, we've got many other products which are moving from Olin's portfolio into Huntsman's EDC, Epi, LER and also caustic and we'll take advantage of those as and when we're able to, and we've already assumed that we'll get some synergies pretty early on once the deal is actually consummated.

Thank you. Our final question will come from the line of Laurence Alexander with Jefferies.

So I wanted to just touch on 2 things quickly, if possible. One is does the merger open up scope for pruning or divestitures within your portfolio? -- to accelerate the deleveraging. Like can you just give us a sense of like what fits versus what is nice to have or maybe doesn't fit so well on the kind of merged portfolio basis from your perspective?

And then secondly, just on innovation. Can you update on 2 fronts? One, kind of with a discussion around the composite materials going into aerospace and so on and the demand there what your current perspective is on Miralon and whatever happened to sort of scaling that up over time. And then secondly, kind of the strategy around the polyurethane derivatives business or downstream business, the innovation efforts you were doing there. Can you give a sense for how much that is adding to the growth. I realize it's swamped by the end market swings. But in terms of a compound effect, kind of how much traction have those efforts had over the last couple of years? And what does that set up for the next few years?

Yes. Laurence, thanks. Great question. I think that when you look at portfolio management, that's going to be a decision that will be made by the new CEO of Olin Huntsman Ken Lane, obviously, with the input of his management team and also that of the Board of Directors and looking over that entire portfolio. I think any prudent company has to be able to look at their asset base and what impact do those assets have and where is the value of those assets.

The larger your portfolio is, I think, is a general rule of thumb, not just in the chemical industry, but across the board, the larger your portfolio is the more flexibility you have if you're a relatively small company and you've got 2 divisions, you don't have a lot of optionality of getting rid of 1 of those divisions because you may end up being so small, you can't afford to get that small and cut the company in half, if you've got a larger portfolio, more entities and different forms of integration and so forth, I think you've got more flexibility there.

So again, probably a frustrating answer to you in the sense that I'm not going to get in obviously in the various products or divisions or entities and so forth. But I think that this does give both companies once they're together, greater flexibility to assess their assets and do more aggressively achieve their objectives of deleveraging and having a strong balance sheet.

As I think about Miralon and the overall products that we see there. I think that we've -- if I were just to put it in the simplest of terms, the product that we're producing today is being very well accepted by customers. And our challenge it is before us today. is how do we scale that production up as quickly as possible and as successfully as possible. I'd rather have that challenge then the challenge that we're able to make a lot of product that nobody wants.

So we're able to make something that customers have been able to utilize. They've seen the benefit of it. Now our challenge is to make sure that we've got the ability to increase our capacity, thus lowering the cost per ton of production. And I believe that we're well on that path. Again, as I said earlier, saying with synergies, showed me the output and show me the results and I think you get credit for it. And I think we're much closer to achieving that than we were a quarter or 2 ago.

As we look at our downstream derivatives in polyurethanes, I believe that we have -- looking at our insulation business, looking at our adhesives, our elastomers our ag businesses that we talked about earlier. We're going to continue to build on those. I think we've got a very good product pipeline the investment we made a few years ago in the Patriot product in Louisiana to further derivatize downstream our capacity gives us the ability in China gives us the ability in Europe and gives us the ability in North America to take more pounds than we've ever had before. and derivatize those into greater value-added components. And that's going to be an important part of our strategy going forward.

Laurence, I just look at growth numbers that we put out this quarter, 8% in Advanced Materials, 4% in polyurethanes, and those are clearly in excess of what we're seeing in the underlying markets. And a big part of that is the innovation gains that we're seeing throughout those 2 divisions.

Thank you. We have reached the end of our question-and-answer session. And with that, I would like to bring the call to a close. We appreciate your participation. You may disconnect your lines at this time. and have a wonderful day.

Welcome to the conference call and webcast to discuss the combination of Olin Corporation and Huntsman Corporation. [Operator Instructions]. I would now like to turn the call over to Steve Keenan, Director of Investor Relations at Olin. Sir, please begin.

Thanks, Chelsea, and welcome, everyone. I'm joined on the call today by Ken Lane, President and Chief Executive Officer of Olin; and Peter Huntsman, Chairman, President and Chief Executive Officer of Huntsman. Todd Slater, Olin's Senior Vice President and Chief Financial Officer; and Phil Lister, Huntsman's Executive Vice President and Chief Financial Officer, will participate in the Q&A portion of today's call. Before we begin, I'd like to remind everyone that today's discussion regarding Olin and Huntsman includes forward-looking statements, including expectations regarding the proposed transaction. These statements are subject to risks and uncertainties, and we encourage you to review our related SEC filings for more detail. I would now like to turn the call over to Ken.

Thank you, Steve, and good morning, everyone. I appreciate you joining us. Today is a momentous one for Olin and Huntsman, two storied American companies with a shared commitment to safety, integrity, operational excellence and serving customers around the world, all while creating value for our shareholders. .

The all-stock merger of equals we announced this morning will create a greater than $12 billion chemicals leader with a strong North American anchor and complementary European and Asian portfolios. By integrating Olin's strong upstream manufacturing and feedstock position with Huntsman's differentiated downstream capabilities, we will have a world-scale, vertically integrated platform that is better positioned to serve customers and deliver resilient financial performance.

The combined portfolio also creates tangible integration opportunities across key value chains, supporting a lower cost position through the cycle. These strategic tailwinds are paired with more than $400 million of cost synergies and integration benefits. The combined business will have strong cash flow to support disciplined capital allocation including near-term deleveraging, returning capital to shareholders and investing in high-return growth projects.

I've spent my career in chemicals across both commodity and downstream businesses, including running a global polyurethanes business. I understand how to get the best out of these businesses in many respects, that means running them as complementary, but separate, and I'm confident we can do that while also delivering on the benefits of this transaction.

Olin's stated strategy is to focus on strengthening our core businesses, maximizing valuations where we can achieve attractive returns through innovation and operational improvements. This transaction hits those marks. Further, as Olin Huntsman will be led by a team with the right experience and shared foundational values to ensure we are capturing all the opportunities available to us.

I'd now like to turn it over to Peter Huntsman to walk through the transaction structure and combined platform in greater detail. But before I do, I'll take a moment to recognize Olin's dedicated employees whose commitment and focus has made today's milestone possible. I'm very proud to be part of the Olin team. I'd also like to acknowledge Peter and his team. As you might expect, over the course of reaching this agreement, Peter and I have spent a good deal of time together. It's been clear what a world-class team Huntsman also has with great expertise, and most importantly, truly held values that we at Olin share.

Peter, I'm looking forward to working with you and the other directors of the Board. I know OlinHuntsman is going to do great things.

Ken, thank you very much. Good morning, everyone, and thank you for taking the time to join us. It is an honor to be here today, and I echo Ken's enthusiasm for the opportunities ahead. As our industry continues to globalize, we compete more today against countries than companies, trade policies and global supply chains more than ever before. The opportunities this merger creates enables us to generate greater value for our shareholders, delivers exceptional services and products for our customers and provide greater opportunities and stabilities for our associates. This merger of equals takes 2 great companies and create a much stronger global leader.

So let me provide some further detail. Let's turn to Slide #5. We have structured this combination as an all-stock merger of equals, which we believe capitalizes on the strength of both companies and present the best value creation opportunities for both sets of shareholders. Under the terms of the agreement, Huntsman shareholders will receive 0.576 shares of Olin for each Huntsman share they own, resulting in Olin shareholders owning approximately 54.5% and Huntsman shareholders owning approximately 45.5% of the combined company. The combined company will be named OlinHuntsman Corporation and will be headquartered in the Woodlands, Texas.

As Ken mentioned, we have identified more than $400 million of cost synergies and integration benefits. Our respective teams have spent a great deal of time together identifying and validating these synergies, and Ken will provide greater detail on how we will achieve them later in this presentation. The transaction is expected to close in the first half of 2027, subject to receipt of regulatory approvals and satisfaction of other customary closing conditions, including approval from both Olin and Huntsman shareholders. Following the close, I will serve as Non-Exec Chairman of the Board of Directors, and Ken will assume the role of Chief Executive Officer. Phil Lister, will serve as Chief Financial Officer; and Todd Slater, will serve as the Chief Integration Officer.

Let's turn to Slide #6. Let me spend a moment on the scale and benefits of the combined company. Using 2025 reported financials on a pro forma basis, the combined company would have generated approximately $12.5 billion in revenue and approximately $1.3 billion of adjusted EBITDA, including expected cost synergies. We will be anchored in cost advantage in North American assets and feedstocks with integrated portfolios that create multiple channels for improved economics and value creation across a broad range of attractive end markets. We also have identified opportunities in Europe that capitalize on our integration and downstream capabilities. With Huntsman's relationships in these global end markets, we have a unique opportunity to deliver for our customers more profitably by leveraging Olin assets to improve efficiency across the value chain.

We can turn to Slide #7. Our industry has changed a lot over the last 5 years. Cost position, reliability and integration matters more than ever. That is why I believe this type of integration is essential to driving optionality and higher profitability now and into the future. You see on Slide 7, Olin brings advantaged upstream leadership, including an efficient cost position from U.S. Gulf Coast economics and world-scale chemical assets. Huntsman brings downstream application expertise, including leading positions in MDI and polyurethane systems ride and advanced materials, supported by deep end-market customer relationships. Put simply, we believe this combination will drive value creation for our shareholders and unlock greater profitability.

So looking at Slide 8, there is a clear indication of how integration creates value for both companies across several key value chains. The combination brings together selected Olin and Huntsman capabilities across electrochemical units to polyurethanes, electrochemical units to amines and to epoxies. Olin is strong at the front end of the value chain with the ability to make chlorine and caustic soda safely, reliably and at world scale. Huntsman is strong downstream, particularly in polyurethanes, amines, advanced materials and formulation-driven applications. By combining these capabilities, we create more reliability and better integrated supply chains capable of generating greater value to shareholders and customers.

For example, today, Olin has several existing outlets for chlorine, including vinyls, epoxy, water treatment, chlorinated organics, merchant chlorine and hydrochloric acid. Through the combination, OlinHuntsman will have additional outlets across polyurethanes, amines and advanced materials broadening participation across the value chain. It also creates a vertically integrated U.S. MDI producer. Starting in 2031 as current supply contracts expire, we expect to add an additional $100 million or more of incremental synergies. The result is a more closely integrated set of chlorine-linked value chains that benefits both businesses and positions the combined company for future downstream opportunities across high-growth end markets.

Before turning our concluding comments back to Ken, I'd like to comment that from the first meeting nearly 4 months ago, we have both seen this as a merger of opportunities where the sum of the parts create greater benefits than both companies remaining separate. I have found in Ken, a leader that shares a vision and the capability to create greater value and opportunity in this merger. Ken?

Thank you, Peter. The expected cost synergies and integration benefits from this combination are significant and actionable. The companies have identified more than $400 million of value with clear line of sight. Of that, we see $300 million of synergies with much of that achieved in the first 24 months following close. These synergies are expected to come from several areas, including purchasing and raw materials integration, optimization of operations and SG&A savings.

As we've said, we also expect to capture more value internally with more than $100 million of additional raw material integration benefits in 2031 due to expiring contracts and Olin stepping in to fill supply. We expect the cost to achieve these synergies to be approximately $150 million to $200 million.

In addition, OlinHuntsman is expected to benefit from approximately $125 million of cash tax benefits from acceleration of tax NOLs, which is not included in the synergy figure. Both Olin and Huntsman have executed complex integrations before, including the Dow Chlorine Products business, where Olin delivered more synergies than originally announced, and Huntsman's track record of integrating multiple acquisitions of different sizes and complexity over the years. We'll bring that same discipline and accountability to this combination.

OlinHuntsman is expected to have improved profitability and cash flow through the cycle. As we mentioned earlier, despite a challenging market backdrop on a 2025 pro forma basis, OlinHuntsman would have generated over $900 million of adjusted EBITDA. When including the expected synergies of $400 million, the combined company would have generated approximately $1.3 billion of adjusted EBITDA.

Looking across the 2021 to 2025 period on a pro forma basis, OlinHuntsman would have generated approximately $2.7 billion of average adjusted EBITDA, including the $400 million of synergies. We believe this shows the capability of the combined company to deliver compelling profitability, substantial free cash flow and importantly, greater resilience across varying operating environments.

On the following slide, we provide some more detail on the pro forma financial profile of the business. We expect to have a healthy balance sheet with an evenly weighted maturity profile, no bond maturities before 2029, and an attractive blended cost of debt of approximately 5%. Pro forma year-end 2025 net leverage would have been 4.6 times or approximately 3.2 times with full synergy implementation. And as mentioned earlier, one of our initial priorities for our free cash flow will be to deleverage.

Beyond deleveraging, our cash flow will be an engine of shareholder value creation. First, maintenance capital. We expect to invest approximately $400 million per year on a combined basis to ensure safe and reliable operations. Second, the dividend. We expect to continue a stable dividend policy supported by resilient through-cycle cash flows of the combined company. And with excess cash, we'll prioritize returning cash to shareholders and pursuing growth projects that meet a high return threshold.

To summarize, this combination is a compelling opportunity for both sets of shareholders today and into the future. Together, Olin and Huntsman will create a greater than $12 billion North American chemicals leader that will better serve customers across diverse and growing end markets. The combination creates a vertically integrated platform with a structurally lower cost position. We'll approach integration with discipline, including how we segment and manage the combined company so that integrated manufacturing and downstream businesses can each succeed.

OlinHuntsman will benefit from a highly experienced management team with a shared focus on value creation. This strategic combination creates greater resilience, stronger cash generation and a balance sheet that will open multiple avenues for creating value for our shareholders.

With that, Chelsea, we're now ready to take questions.

[Operator Instructions]

Our first question will come from Josh Spector with UBS.

I guess I wanted to ask more on the Huntsman side specifically. I mean it seems like doing this integration here, I mean, a lot of what Huntsman has been doing over the last decade has been shedding more of the commodity operations, kind of trying to focus more downstream. This seems like a step backwards in that regard. Obviously, the cost savings are large and clearly a big driver here. But just curious strategically kind of why go this route now with the business versus what the strategy has been over the last 5, 10 years?

Josh, excellent question. Look, as we look at our advanced materials and our ability to move further downstream, I see nothing in this merger that would in any way prohibit that. As matter of fact, I see it as a great opportunity that this will be an entity that will create even greater cash, create greater opportunity with a very resilient supply chain and a very competitive one at that.

As I look at our competitors and the changing landscape around the world, the value that many of the people that we compete with today are integrated, whether it's in coal in China or in the Middle East with some sort of subsidized or government rationed gas or energy or even in the United States, being able to have a North American gas advantage. I look at all those regions around the world where we presently compete, we'll be in a more competitive position. We'll be in a company that is generating greater cash, has a stronger balance sheet. If anything, we'll have a greater opportunity to focus on those downstream applications. So I see this as really a win-win on that strategy to keep us competitive.

Our next question will come from David Begleiter with Deutsche Bank.

This is Emily Fusco, on for Dave Begleiter. I was just wondering if you could maybe -- for the $75 million purchasing economics, if there's any overlap on savings or just any color there?

Emily, this is Ken. Listen, that $75 million is what we generate when we look at the joint purchases or the purchases that we do as independent companies and you bring us together and you look at the price leverage that we'll have, we'll be reducing supplier bases. Those are pretty standard. So we feel highly confident about achieving that $75 million.

I would just note, Emily, that as we look at that $75 million, we've had our purchasing groups that have been able to interact and be able to pick, I wouldn't say that just the low-hanging fruit. But as you get these teams together, as you get better integrated, as you get operating and looking at the number of warehouses and transportation, logistics, all those areas that fall under purchasing, both Ken and I feel that these synergies are imminently doable. And if anything, once we get digging deeper, we think that there'll be even greater opportunity.

Our next question will come from Frank Mitsch with Fermium Research.

A question for both Ken and Peter. Peter, you mentioned that you started in detail this combination 4 months ago. I'm curious from both of you as to what other options were considered and why was this one the best. And also if you can enlighten us, is there a termination fee involved in this transaction?

Frank, thanks for joining us. So listen, as you can imagine, you know at least for Olin, we had an Investor Day back at the end of 2024. And obviously, when you go through and you do corporate strategy work, you look at other options. This is a clear strategic combination sense. It's extremely compelling when you just look at the value chains where we participate and Huntsman participates, very, very complementary.

So we always view this as one of the top of our priorities, and I still feel that way today. So we just were able to validate that over the last few months when we got our teams together that the amount of value that this creates is very significant. And as I said in the prepared remarks, frankly, I do expect that we're going to be able to do this fairly quickly. So if you look within 2 years, we will have achieved the majority of the $300 million. And then there'll be another $100 million that we get in 2031. That is a lot of shareholder value that we're going to be creating with this combination. And if you just capitalize those synergies, it's equivalent to about $2.5 billion to $3 billion. So it's a big number.

Frank, Peter here. I think that I'm not sure there's another company in our industry that has gone through more large-scale potential transactions, divestitures, possible mergers, even outright sales. As I've said multiple times on earnings calls and in public audiences, I think that it's one of our first obligations as a company is to be able to look at our portfolio and to be able to ask some very serious questions about how that -- how that portfolio is best situated to create shareholder value.

As I look at this merger of equals, I look at the synergies, I look at management, I look at the supply chains, this touches all 3 of our divisions. This isn't just an area that we're going to be bolstering epoxies and polyurethanes. In every one of our divisions, the chlor-alkali chain is absolutely vital to our competitiveness, being able to have a competitive, a resilient and a global leader like Olin, being able to complement those downstream businesses. This is -- I think it's just -- with all the opportunities that have been before us for years, this is really an ideal match for our company.

Our next question will come from Kevin McCarthy with Vertical Research Partners.

Two questions. On the synergy side, you have an additional $100 million of procurement savings in 2031. So I was wondering if you could comment on why those particular savings would take longer to extract or whether or not there are any contractual constraints at work there? And then second, maybe for Ken, does this change strategic options as it relates to Winchester at all, things like scale or tax angles associated with a theoretical separation there? I appreciate any thoughts on that subject.

Absolutely. Thank you, Kevin. So listen, I'll start off with the easy one first. Yes, that $100 million in 2031 is a synergy that is really related to timing of current contracts that will be expiring and then Olin will step in and begin supplying that. So that is a very easy one. That is a benefit that will happen. It's just a matter of time, and it will be a very good fit with our portfolio.

To your second question, Winchester is going to continue to be a very important part of our portfolio. It's going to continue to be run as a key business within OlinHuntsman. The strategy that we rolled out at the Investor Day at the end of 2024, where we said we were going to focus on growing our defense business and continuing to get a lot of value for the leading brand in the industry, that holds true. We see a lot of great things ahead for Winchester and nothing changes with that related to this combination.

Our next question will come from Jeff Zekauskas with JPMorgan.

What are the cash costs of achieving the synergies? And for Peter, Huntsman may have had the possibility of combining with an MDI producer. Why was it better over a longer period of time to not wait and look for an MDI opportunity rather than to merge in more of a diversification transaction?

Jeff, excellent question. I think that as we look at the MDI industry, I think that you're probably limited to some degree with various antitrust issues on a global basis. But more importantly than just MDI, which is certainly an important part of our company, but it is certainly not the entirety of our company. And as we look at a transaction that is going to impact our downstream advanced materials, our amines, our MDI, really across the entire supply chain, this has a much greater impact on that than I think just adding more MDI tonnage, being able to have a very competitive North American cost advantage, being able to have integration opportunity in Europe.

And I think that as we look at the growing markets in Asia for both companies, we see opportunities there to leverage existing contracts, existing customer relationships and so forth. So I think there probably would be a space there for an expansion in MDI. But as I look across the board, again, across what is going to have the greatest impact for creating shareholder value across the board, this would have a much greater impact.

And then Jeff, related to the cash cost of the synergies, that is $150 million to $200 million is what we're estimating. And one thing that I want to point out as well is this is very consistent with the strategy that we've been laying out in terms of optionality for our ECUs. And by doing this as a merger of equals, this doesn't take anything off the table. So the options that we had before still remain. And I think as a combined company, they're going to be even -- as a stronger company when we're combined, those options are going to look even more attractive.

Our next question will come from Hassan Ahmed with Alembic Global Advisors.

I guess you guys mentioned that Winchester will continue to remain a core part of the portfolio. Now as you guys get more diversified in chemicals, I'm just trying to sort of understand if there are other portfolio management opportunities as well. Peter, historically, you talked about growing the Advanced Materials business. But now obviously, having more in the portfolio, I mean, could that be a divestiture candidate amongst others?

No, I personally don't see that as a divestiture candidate. I do see it as a continued platform for growth, both on the short-term and on the longer-term basis. And as you think about supply chain, the resiliency, the uniqueness of this combination, being able to start with sodium chloride with the salt molecule, take that all the way down, really uninterrupted to the wing of a Boeing or Airbus jetliner. I mean, to be able to have that integration and to be able to look at the opportunities that exist within that chemistry along that entire -- not just on the end, but also at the beginning of that chemistry, the efficiencies and so forth, the relationships that can be built, I think, is terrific. So no, I don't see that as a divestiture candidate. If anything, I see it as a core component to future organic growth.

Our next question will come from Laurence Alexander with Jefferies.

It sounds as if you have significant strategic optionality in both the sort of ammunition defense and the epoxies and the MDI potentially. So how are you thinking about your balance sheet for the pro forma entity? Like how much would you be willing to flex the balance sheet for an acquisition? How would you think about an appropriate mid-cycle balance sheet target for the pro forma entity?

Laurence, thank you for joining us. So listen, obviously, we're going to be doing a lot of work between now and closing to get ready for day 1, and there'll be a lot of work and thinking that we've got to do around strategy for OlinHuntsman. We, as I said just a minute ago, by structuring this as a merger of equals, we haven't really taken any options off the table. And now we've got to get together as OlinHuntsman and figure out where we want to go next.

But as we said in the prepared remarks, capital allocation, the priorities will continue to be: first, investing in our assets for safety and reliability, maintaining a stable dividend. And then excess cash is going to go towards deleveraging initially. That's got to be a priority for us in the short term. But beyond that, we're not ready to talk about any other strategic options, but we're extremely excited about what the future holds.

Yes. I would just reemphasize what Ken said about that capital discipline. I think this is something where we are of one mind. As the only thing that I see that is at all problematic with this merger is I wish it would have happened a year ago. Had we been in these challenging times that we're in today as an industry and this merger had already taken place a year or 2 ago, the combined entity from a cash, from a balance sheet, from a resiliency point of view would be that much greater value.

And we -- I think I can speak for both of us saying that we're in these sort of market conditions, balance sheet strength and deleveraging is going to be a very key and fundamental. I hope that the time comes and we can -- we're generating the cash and so forth, and we have some great discussions internally as to where that cash should be deployed in other areas. But right now, particularly during these times, our focus is clear.

Our next question will come from Mike Harrison with Seaport Research Partners.

Can you hear me okay?

We can.

Perfect. I'm just curious from a revenue growth perspective, are there any end markets or geographic positions or maybe specific customers where Olin might be able to realize some cross-selling or other revenue synergies by leveraging Huntsman? And to the extent that you see some revenue synergy opportunities out there, how should we think about the timing of realizing some of those synergies?

Mike, listen, one thing I want to be really clear about is we have not included any revenue synergies in these numbers. That doesn't mean that we don't see opportunities. We see a lot of opportunity, especially in the epoxy space for us to be able to leverage the downstream business that Huntsman has with their channels, but also with the current Olin know-how and backward integration.

So bringing those 2 together is going to create a more competitive business that will allow us to be able to compete in some industries that maybe one of us weren't able to previously, and now we're going to be able to do that. So there's a lot of opportunities that are still to come. I'm extremely optimistic that we will be able to grow not only current market positions, but enter new markets that maybe we haven't been able to position that we're going to have. So stay tuned. Again, there's a lot more to come, but we have not included any of those revenue synergies so far in the valuation.

Our next question comes from Matthew Blair with Tudor, Pickering.

You highlighted the opportunities for cost cuts and integration benefits from the deal. I wanted to ask about valuation. So these 2 companies tend to trade at pretty different multiples. I'm showing over the past 3 years that Huntsman has traded at an average forward consensus EBITDA multiple of nearly 10 times, Olin is around 6.6 times. So my question is, as you're doing this analysis, where did you assume that NewCo would trade? And is it a blended multiple? Or is there a risk here that NewCo would trade at lower than the blended multiple that might be closer to the Olin multiple?

I think -- Matthew, I think the market is going to have to determine that. When I look at the overall size, resiliency, again, I don't want to get too much in the weeds there on the multiple. Multiples have a lot to do with where you are in the cycle at any given point. And if you're at the bottom of the cycle, you typically have a higher multiple. And this is -- as you're at the top of the cycle, you're probably going to have a lower multiple.

So I think that as we look at this rather than trying to get a multiple that's exactly right between the 2, the market will determine. If you have a more resilient company, if you have opportunities for growth, further synergies, further organic growth efficiencies through your supply chain, as these things all come together, and you see a stronger balance sheet is emerging, all of these things, I think, will have a factor into what your multiple is. And that probably will be different than what Olin is today or what Huntsman is today. It will be what OlinHuntsman is going to be.

Absolutely. And Matthew, just to reinforce, $2.5 billion to $3 billion of capitalized synergies is what our focus has been on and will continue to be on.

Our next question comes from Duffy Fischer with Goldman Sachs.

Two questions. First one is just on a notional basis, how much does this integrate your ECU? So if you basically sold everything from Olin to Huntsman, how many ECUs would you consume in doing that? Again, the exact number, but just roughly what is the integration? And then second, on the shares outstanding, if we just use your ratio in the 173 million from the last quarter, that would be about 97 -- I'm sorry, 94.7 million shares. Is that the right number? Or would there be some change of control stuff that there will actually be more shares involved with the conversion?

Duffy, I'll take the first question, and then I'll ask Phil to comment on your second one. I mean, listen, as you know, Olin is the largest chlor-alkali producer. So this is a meaningful amount of integration for our ECUs. But as you know, we don't operate our assets fully loaded today in the trough that we're in. So yes, this is a great synergy, a great benefit for us as a combined company. But the optionality for our ECUs that we talked about at the end of 2024 are still intact. And so we're really excited about what we see here probably as much from a downstream perspective as we do from an upstream. So it's meaningful for us, but we still have got the largest footprint in chlor-alkali.

Duffy, on the share count, the way the merger of equals will work is that you use a fully diluted share count. And for Huntsman today, that's approximately 178 million shares. If you do the math on that with the exchange ratio that you quoted, you'll end up with 97 million shares ultimately at conversion.

Our next question will come from John Roberts with Mizuho.

Is the acceleration just the expectation of higher earnings post merger? Or is there something beyond that, that you're expecting?

Yes, John. So if you look at the merger and bringing both Huntsman and Olin together and you look at the NOLs that Huntsman has, there's a clear opportunity to utilize those, particularly given the strength of Olin and particularly given the strength of Olin in the United States, we would see a clear acceleration from bringing those 2 operations together.

Our last question will come from Bhavesh Lodaya with BMO Capital Markets.

Maybe a follow-up question on the balance sheet leverage. Do you see synergies as the primary way to delever the combined entity here? And then presumably with some initial thoughts around the merger synergies generation, how should we think about the free cash flow profile in the initial years?

So let me start, and then I'll let Phil comment as well. I mean, listen, both the synergies and excess cash are going to be used to initially delever. I wouldn't say that one is primary over the other. We're going to work as hard as we can to realize the synergies as fast as we can. Todd Slater, I can promise you, is absolutely committed to doing that as quickly as possible. And as we realize that and our earnings expand and our cash flow expands, we'll be allocating some of that cash to delever. But Phil, what would you add to that?

Yes. If you look at the free cash flow delivery and just look back to 2025, a large focus from both teams on cash management. And you look at the metrics around operating cash flow conversion, look at free cash flow conversion, those have been pretty high for the company. That will remain as we go forward. It will be a stronger financial profile as a result of the delivery of those synergies, and that will fall through to the free cash flow line. So we see a stronger free cash flow conversion as we move forward.

There are no further questions in the queue at this time. So I'd like to turn the floor back over to Ken Lane, CEO of Olin, for any closing remarks.

Thank you, Chelsea. We're very excited about our future as OlinHuntsman and the value we'll create. We look forward to continuing to engage with all of you as we progress toward closing the transaction. In the meantime, both Olin and Huntsman will continue to operate as 2 separate and independent companies. Our highly experienced management teams and thousands of associates and teammates around the world will continue to focus on safely and reliably serving our customers. We're grateful for all that they do each day to make Olin and Huntsman the incredible companies they are. Thank you all for joining us this morning.

This concludes today's conference call. Please disconnect your line at this time, and have a wonderful day.

Greetings. Welcome to Huntsman's First Quarter 2026 Earnings Call [Operator Instructions] Please note, this conference is being recorded.

At this time, I'll turn the conference over to Ivan Marcuse, Vice President of Investor Relations and Corporate Development. Thank you. You may now begin.

Thanks, Rob, and good morning, everyone. Welcome to Huntsman's First Quarter 2026 Earnings Call. Joining us on the call today are Peter Huntsman, Chairman, CEO and President; and Phil Lister, Executive Vice President and CFO. Yesterday, April 30, 2026, we released our earnings for the First Quarter of 2026 via press release and posted to our website, huntsman.com. We also posted a set of slides and detailed commentary discussed in the first quarter 2026 on our website. Peter Huntsman will provide some opening comments shortly, and we will then move to the question-and-answer session for the remainder of the call.

During this call, let me remind you that we may make statements about our projections or expectations for the future. All such statements are forward-looking statements, and while they reflect our current expectations, they involve risks and uncertainties and are not guarantees of future performance. You should review our filings with the SEC for more information regarding the factors that could cause actual results to differ materially from these projections or expectations. We do not plan on publicly updating or revising any forward-looking statements during the quarter.

We will also refer to non-GAAP financial measures such as adjusted EBITDA, adjusted net income or loss and free cash flow. You can find reconciliations to the most directly comparable GAAP financial measure in our earnings release, which has been posted to our website at huntsman.com.

I'll now turn the call over to Peter Huntsman, our Chairman and President.

Ivan, thank you very much. Thank you all for taking the time to join us this morning. Before I begin my remarks about our company and recent events. I want to simply say that I hope there is a quick and peaceful resolution to the ongoing conflict in the Middle East. Over the past 40 years, I've had the opportunity to visit every country bordering the Persian Gulf with the exception of [ Iraq ]. I have always been treated warmly and fairly by the people I've encountered. I hope that my comments to come across [indiscernible] any way to the suffering and fear emanating from this region as I address the economic impact of these events to our bottom line and industry.

From the first hours of this conflict, our #1 commercial priority has been to increase [indiscernible] enough to offset rising costs. I believe we've been successful in doing this. This will require continued communications with our customers and suppliers, and also the discipline to make sure that we are not a shock absorber between raw material costs and finished product pricing.

Our next priority is operating our plants in a reliable manner to make sure that we have the product to meet our demand. Our operations during the first quarter and going into the second quarter have been excellent. From a sales perspective, we are seeing stronger-than-expected demand going well into the second quarter. I would say that this is being brought about by 3 factors.

Number one, seasonality as we move into the second quarter and the building season resumes across North America, Europe and Asia. Number two, customers who are buying ahead of the expected price increases that are being announced. And number three, disruptions that have been seen in certain trade flows that have impacted supply. An example of this would be some of our maleic customers in Europe, who will become overly dependent on Chinese supply maleic, have seen a disruption in supply as raw materials and shipping costs have increased from that region.

These 3 factors are also happening at a time when most inventory levels are very low across many supply chains. These improved order patterns are being seen as we enter into the second quarter, in most of our regions and across many of our products. The obvious countervailing point to all of this is how long does it continue? I can't see order patterns that go through the month of June. But the guidance that we have shared from each division in Q2 reflect what we've seen to date. Today, that visibility is less clear as we look further into the quarter.

I struggle to see how inflationary pressures, particularly in areas reliant on imported energy, like much of Asia and Europe, will not see an inevitable downward pressure later in the year as consumer spending gradually shift towards higher prices. To what degree this occurs is yet to be [ seen ]. I am heartened to see the housing starts and durable goods orders in the United States better than expected for the month of March. But I'm also keeping an eye on residential permits. A step that precedes construction starts down 11% for the month of March.

There will also be some longer-term dislocation of traditional economics. If you are a producer that enjoyed discounted raw materials coming out of Venezuela, Iran and Russia a few months ago. It is likely that you're not seeing such discounts today, and I highly doubt you'll see them in the foreseeable future. Many customers are looking for closer and more secure sources of supply. Supply chains are sifting and being reassessed. I believe that there will be some lasting impact for certain regions and products that may not seem too apparent today. It is simply too early to know how lasting some of these will be.

In short, we are aggressively raising our prices to both cover our cost of our raw materials while also expanding margins from the trough economics that we've been experiencing for the past 3 years. We will continue to manage our costs and deliver these objectives on budget. We will be focused on volumes and make sure that spot buying also comes with longer-term volumes and obligations. I'm glad to see the trends that we're seeing in the second quarter, but we still have a ways to go to get to our normalized margin levels. This will require stable and longer-term demand trends to continue. I feel that we are in a strong position today to capitalize on such changes going forward.

Thank you. And operator, with that, we'll turn -- open the time up for Q&A.

[Operator Instructions] And our first question is from the line of Patrick Cunningham with Citi.

In the release, you talked about the potential for a more durable return to mid-cycle profitability. This likely depends on both supply and demand side at this point. But can you give us the latest view on what this crisis may do in terms of supply-side rationalization for MDI and polyurethanes? How do you see this playing out in terms of structural energy cost pressure, feedstock availability or potential closures at this point?

I don't see a great deal of structural change as we look at MDI. I do see pressures continuing in Europe. If you're a European producer now having to put up with natural gas, that's probably somewhere in the mid-teens versus where we are today. I noticed in the Houston ship channel price this morning was under $2 per MMBtu. These are real material gaps in shift. I can't help but think that there's going to be continued pressure on petrochemical producers across the board and in MDI across Europe.

But having said that, I also think that there are probably some structural issues that may make Chinese exports in certain products. I won't get into exactly [indiscernible] products [indiscernible], but I think that they're varied across the board. If you're relying on coal as a raw material in China, you're probably doing quite well. If you're integrated into a world-scale refinery and integrated system in China, you're probably doing [indiscernible] well. If you're a part of what they call the [ teapot ] collection of refineries integrated into export bound chemical facilities, you may be under some cost pressures as you see some of the discounted crude product.

So it's not just what we see from a competitive point of view. It's also what we see from the raw material that many of our customers, and many of our competitors and the industry in general will be facing. And I think those are some of the longer-term issues that we'll be dealing with even after the Strait of Hormuz hopefully open soon here.

Very helpful. And could you talk about some of the sustainability of the positive trends you're seeing in Advanced Materials, particularly interested in line of sight into aerospace and power order books and what that potentially means for segment profitability in 2026?

I think that I don't want to get too much into our numbers is the worry [indiscernible] and where we saw a lot of upside since the beginning of the war. But my CFO will start kicking in the side here. But what we -- the performance we're seeing in Advanced Materials is largely what we expected a quarter ago. We may have seen a little bit of [indiscernible] in pricing. But remember, that business is not reliant on any one major raw material. As you would see, for instance, in benzene going into MDI or some of the raw materials, caustic and chlorine prices and so forth into some of our Performance Products materials. And so as you look at our Advanced Materials section, that continues as we see -- as we've said now the last couple of quarters. We see the recovery continue with aerospace power, these better than GDP growth businesses. That business is just going to continue to get traction. And I'm not sure the results this quarter and the second quarter where we finished the first quarter. I'm not sure that would be materially different from where we'd be without the Gulf conflict.

Our next question is from the line of Kevin McCarthy with Vertical Research Partners.

Peter, can you speak to operating rates in MDI, both for Huntsman and also what you're observing at the industry level? And related to that, how are things changing post war versus pre-war?

Yes. I think that as we look at the industry in general, you're probably looking at the low-to-mid 80s. I think now, from where we are, we would be in the high 80s, we're sold out completely in our Chinese operation. Our U.S. operation for the most part is sold out. Europe. So as we said, when we announced our first quarter earnings before the Middle East conflict, we're starting to see some green shoots there. We continue to see some opportunities in Europe. And I would say that we're operating at pretty good levels across the board.

There have been a number of outages and I would say, short term and also planned disruptions in the industry, not to be too unexpected. When you go -- have an industry that's been operating kind of at a low probably [ 70, 80 ] [indiscernible] for the last couple of years. And now all of a sudden, you see an increase in demand and pull-through, you typically have operating issues. So I can't speak about the competition, but I can just say in our facilities, all 3 of our MDI facilities, our associates there have done a fantastic job in their operations.

And then secondly, I imagine your PO/MTBE joint venture in China has become more profitable. Maybe you can talk about what you might expect for equity earnings trajectory moving forward?

Yes, I -- it's -- certainly in the past, it's been a little bit of a drag on us. I think today, we're probably in the low to mid-single-digit, millions of dollars of impact on that business. So certainly doing better than it has been in the past. And I would hope that MTBE, that [ C factors ] should improve as you get more into the driving season, but that's -- there's just so much volatility right now in the whole refining chain and what's going on with [ PO ] economics, [ that'd ] probably be one of the murkier businesses that we have as far as looking into the future.

Remember, Kevin, the price of gasoline is managed differently in China than elsewhere in the world. So MTBE margins aren't what you would expect in China, where the Chinese joint venture is making money today is on propylene oxide and the margins that we're seeing there over and above propylene.

The next questions come from the line of Frank Mitsch with Fermium Research.

That's interesting. So PO is doing better than TBA, MTBE and in China. Thanks for the enlightenment. Peter, I was wondering if you could speak to the polyurethane and MDI pricing initiatives that are underway. How that relates to underlying benzene costs? And what sort of successes are you seeing, or not on that front?

Well, I'd say that we're seeing a -- we're certainly staying ahead of the benzene curve, never as far ahead as I would like to see it. I'd like to see it multiple times better than what we're seeing, but I highly complement our sales and marketing groups on their aggressiveness and making sure that we're covering our raw material costs and staying ahead of that. So yes, both from a volumetric basis, we'll see a positive influence on it and also margin expansion above and beyond raw materials, we should see the expansion on that.

All right. Terrific. Great. So margin expansion. So if I think about the price mix for Huntsman overall, it's been negative for several quarters here, given these initiatives that you have underway, is the expectation for the full company to show positive price mix here in 2Q and hopefully [ beyond ]?

Certainly, in Q2, hopefully, beyond, I would reinforce that as well. I mean as I get at some of the pricing trends that we're seeing going into the second quarter. Just to give you an idea, in North America, I'm talking about all products, all prices. So I'm not [indiscernible] one division, but we have not seen a quarter-on-quarter growth in pricing trends. [indiscernible] you're unfortunately, you're right in what you said earlier, we haven't seen that since 2022.

So the trends that we're seeing right now and the jump that we're seeing on a quarterly basis right now in North America, we haven't seen that in years now. Europe isn't too dissimilar. We've seen a few quarters here and there where we've seen some pricing. But that's more to do because of the strength of our Advanced Materials business in Europe, not because of the macro trends there. So yes, I like where we're going into the second quarter. And [indiscernible] question is how sustainable is it. But it's -- look, it's a lot better than where we were a quarter ago.

Our next questions come from the line of Hassan Ahmed with Alembic Global.

Peter, I just wanted to revisit some of the earlier commentary around MDI supply, both as it pertains to the product, as well as the feedstock. I mean, there's at least one facility in Saudi Arabia that seems to be off-line. And then obviously, I would imagine there would be sort of broader issues in terms of the availability and pricing of benzene as well as methanol.

So could you comment a bit about sort of operating rates for MDI, keeping in mind some of these outages, as well as some of the feedstock availability issues the world may be encountering. And how long it may take for some of these bottlenecks if peace was declared tomorrow, to sort of be ironed out to the system?

Yes. I think that as we look -- you made reference to -- you made reference to a Middle East producer. That's roughly about 4% of global capacity. So if you if you kind of think that the industry is operating in the low to mid-80s, I would say that we're kind of pushing the mid- to upper 80s, at 90% capacity utilization globally. Now again, that's not across the board. There will be parts that are better than that, parts that are worse than that. But just globally across the board, when you reach 90% in the MDI industry, given what people have a stated capacity, and the outages that they place on a yearly basis for maintenance and so forth. You're really in an industry that starts to strain at 90-plus percent capacity.

So, I mean statistically on paper, you can see where the industry is now moving into the upper 80s. In some regions of the world, it's going to be, again, better and worse. I've not seen or heard of any problems with the procurement of raw materials in MDI around the world. And the pricing of that raw material so far has been pretty much in line with oil. So that would tell me that there's a pretty decent supply of it that's available.

Longer term, my biggest question on MDI is going to be the sustainability of the demand because, again, previous February 28, I would say that I don't want to say that we were going [indiscernible]. So we're starting to see some green shoots in Europe as we reported earlier. We were moving into the North American housing season. And China was stable and in pretty decent shape. So my whole question is really around sustainability of demand as you looking out in the third and fourth quarter. And [indiscernible] it's just too early to start looking at those order trends.

Understood. And as a follow-up, you mentioned the polythene market in Europe, obviously, was volumes-wise up 4%, which obviously is decent. But in your prepared remarks, you obviously talked about easier compares as well, because last year you obviously had the, sort of, Rotterdam, sort of turnaround. What green shoots are you guys seeing volume-wise in Europe?

And -- and over the last couple of quarters, obviously, long EBITDA lines, it seems for the PU business, EBITDA was negative. Have you guys currently sort of turned that around? Is it actually generating positive EBITDA now?

Yes. To look at your first area, I would think that [ CWP ] composite wood products in Europe is looking pretty good. Technical insulation is -- and that would be your sandwich boards and so forth that are going into data centers, warehouses, prefabricated buildings and so forth. Your [ ACE ] business, adhesions coatings, elastomers business is doing -- again, I don't want to paint [indiscernible] through the roof in Europe, but we're seeing some green shoots in these areas, badly needed by the way. And so yes, I think that certainly is moving towards an area where we don't just want to see a positive EBITDA coming from Europe. We want to see positive [ cash ] coming out of Europe. And so, yes, we're at that precipice and seeing things improve.

And Hassan, as we sit here today, we would expect Europe to be positive from an EBITDA perspective.

Next questions are from the line of Michael Sison with Wells Fargo.

When I take a look at your outlook for polyurethanes for 2Q, margins look like they're going to improve a little bit, but not a lot. So what do you think needs to happen to get the EBITDA margins for polyurethanes at better levels going forward? And just curious what the pricing for the segment should imply for 2Q year-over-year?

I think the two things that we need more than anything else are demand and raw material stability. We're projecting in the second quarter that we'll take in well in excess of around $100 million of raw material costs. We expect to offset that and get prices higher than that. But that's a tremendous amount of raw material costs that we're absorbing in 1 quarter.

Of course, in order to have any sustainability in pricing and pull-through in pricing, we've got to see the demand. So I did note in my prepared remarks, a cautionary note on inflation and what inflation factors may play in Europe. But there's also -- I'd say on one hand, there's those inflation factors that give me concern. On the other hand, Europe has been so lethargic for so long. I can't help but think that there is pent-up demand, whether it be in housing, or remodeling and industrial demand [indiscernible] rebuild and so forth across the board. So that's going to be for the second half of the year, the single biggest variable in my opinion, is going to be demand.

The next question is from the line of David Begleiter with Deutsche Bank.

Peter, just on Performance Products. Why is that business a little bit stronger in Q2 given some of the [ strength ] in maleic?

David, that's an excellent question. And I think as we see the strength in maleic, that certainly is going to be manifest through Q2, going into Q3. A lot of our European customers on maleic are actually buying that and negotiating purchases of that FOB Florida. So -- of our plant in Pensacola, Florida. So picking it up in the U.S. rather than us shipping it over to Europe. And taking the time and tying up working capital and so forth. So we'll see the impact of that going forward.

But I'd also remind you that we also have one of our facilities in Q1, and also presumably could see some impact in Q2, where we have an [ ethylene amines ] facility, joint venture facility, which we believe is one of the lowest cost facilities in [indiscernible] on the wrong side of the Strait of Hormuz. And so that's going to also be a little bit of a headwind in that business.

Very good. And do you have an update on your U.K. [indiscernible] plants given some prior comments?

Yes. Again, that facility when those comments were made, we were seeing $20, $22 gas in Europe and a government that was lethargic at best in concerns with it. And we are seeing import pressures that we're countering that. I think since that time, imports have lessened a bit. We've seen gas plummet from $20 to $15. I still say that's an aesthetically high number for an energy less policy-driven government. And so I wouldn't say that, that facility is -- when I look at the economics of it, I continue to be concerned. The people that work there, the reliability of that facility, the ongoing maintenance and operations and so forth, that facility are absolutely a plus. But they're having to battle some really poor energy policies.

The next question is from the line of Vincent Andrews with Morgan Stanley.

I just want to try to piece together a couple of the comments you made, Peter, as it relates to polyurethanes [indiscernible] completing things, please, obviously, correct me. But you're talking about how you've been able to get pricing ahead of vending, and we traditionally think of you having about a 2-month lag of benzene flowing through. And then maybe later in the year, we may see some negative demand elasticity from the consumer at the end market, working its way back up the supply chain.

So do we think about 2Q, your spreads being strong because you're ahead of that benzene, and then maybe benzene catches up with you in 3Q, and then we have to see how much pricing you can get and that, I guess, would be a function of demand. So thinking 2Q and 3Q may be flattish in terms of profitability in polyurethanes? Or [indiscernible] actually be up a little bit or maybe it would be down a little bit. What's your latest thinking on that?

Well, far too early to comment on Q3. Again, I believe Q3 is going to be more demand driven than anything else. I do -- the trends that I'm seeing today we are staying ahead of the price on benzene. We also are picking up some volume that we see on a year-to-year sort of growth basis. And we're going to continue to be pushing prices through.

Now again, the ability to push those prices through will be predicated on macro demand and so forth. And as I get into the third quarter and again, I don't want to be overly pessimistic about that, I may say that is right now, there's -- I feel there's a bit of euphoria in the industry, and I love to [indiscernible]. I think what's long overdue. I hope it continues into the third and fourth quarter. But a lot of that is just too early to tell on demand.

The next question is from the line of Matthew Blair with Tudor, Pickering, Holt.

I was hoping you could talk a little bit more about just underlying construction activity. One of your peers mentioned that has been weakening. You talked about the diversion in March data between starts and permits. Are there any trends in Q2 on construction activity that you can share so far?

I would say that we're not seeing a drop off, but we're also not seeing a lot of improvement. And I think that -- I would say right now, it certainly isn't shaping to be a bad season for us. It's just not a lot of growth in that. So I'd say there's some stability. But I'm sorry, I probably should be saying [indiscernible] going up or its going down, but it seems to be quite stable at the present time. That's why I say there's some decent trends on housing starts that feel pretty good. And we're -- I think in the second quarter going into the third quarter, we'll probably see 2%, 3% low single-digit growth in construction this year.

But I'm also concerned when you see a 10% drop in 1 month in housing residential permits. Again, that's the step before the housing starts. So again, I don't want to get -- I don't want to read too much into a single quarter of data because February, both of those numbers were the complete opposite. Permits were up and starts were down. So I think we'll probably see some very gradual growth there.

Sounds good. And then I was also intrigued by your comment that you're seeing some customers that are buying ahead of expected price increases. Is this occurring in some products more than others? And if so, which products? And then also on a regional basis, would this be something that's more prevalent in Europe relative to the Americas?

Yes. I would say that as we look at it, you're probably talking about 2, 3 days of -- on MDI, that would be the area where we probably see the most pre-buying. So I'm going to just say that there's -- I wouldn't say that there's a big wave of capacity that is being pulled through. I think that we're managing that very carefully as well. So customers coming in and increasing their orders from where they were just a few weeks ago. We're discouraging that and making sure that we kind of keep an equilibrium on orders and so forth.

And in other areas where people are coming in that haven't bought from us for some time on a spot basis, we're seeing if we can't extend contracts from what you need over the next month or 2 to what you need over the next year or so, some of our Performance Products customers and so forth that may have shifted supplies to China out from Europe and the U.S., for example. So yes, I think on both of these demand trends, we need to make sure on those that are -- there's a difference between those that are spot buying, [indiscernible] buying. And those are just trying to buy ahead of a price increase, they all need to be managed a little bit different.

Sorry, there's not one size that fits all. But right now, if there is prebuying that's taking place, I would be very worried if we were seeing what would be the equivalent of a week or 2 or 3 of prebuying taking place. I would say right now, we're seeing low number of days of inventory that is prebuying at this point.

Our next questions are from the line of Jeff Zekauskas with JPMorgan.

Can you comment on how much Chinese MDI is coming into Europe?

Hasn't been all that much. I wouldn't say that it's anything out of the ordinary. It's been pretty stable with what it's been the last couple of quarters. And -- so it's -- I would say, if anything, maybe it's even a little bit slightly lower than what it's averaged over the last year or so. So nothing that would be nothing that would have a material impact on the industry or pricing there.

Okay. Good. And then in Performance Products, can you frame the penalty from the ethylene amines joint venture being behind the [ Strait ] either in the first quarter or the second quarter, or for the year? And in your guide, you're going from $26 million in EBITDA to an estimate of $30 million to $40 million in the second quarter. Why so big a jump? And why is the range so wide for the second quarter?

As we look at the [ ethyleneamine ] facility, again, that facility, it was down for a couple of weeks. It's operating today. I don't want to get too specific. It's operating, let's say, at around 50%, and material is being trucked out to the Red Sea and also South. So, I mean, we're finding some means of getting product out of there. What the impact of that is going to be and how much that we can offset through operations from our [ Freeport ] facilities, I would say that impact could be as high as $4 million, $5 million for the quarter. So as we look at that spread of $30 million, $40 million, a lot of that is going to be based on how successful we are in getting product economically.

I mean, because you're moving it out by truck. So you can well imagine, that's going to be quite a bit more expensive than moving out by ship. So there's some variability there. I would also say that there's quite a bit of spot material that seemingly is coming -- opportunities coming in [indiscernible]. How much that materializes, what we're able to get pricing, people inquiring people talking about volumes and prices versus actual orders and so forth. We'll know a lot more about that in the coming weeks.

And Jeff, in terms of step-up from Q1 to Q2, just as in polyurethanes, we are seeing pricing exceed the raw material increases.

Our next question is from the line of Mike Harrison with Seaport Research Partners.

You mentioned in the prepared remarks there that were still meaningfully below mid-cycle margins in the polyurethane business. And I was wondering if you can provide any kind of an updated view on where you think mid-cycle margins could be I'll hold off on asking you when you think you can get there. But what is the appropriate mid-cycle margin level for polyurethanes?

Well, I think that we're probably -- I've always thought of it more on what it is on an EBITDA on average basis. And I think that business on average ought to be a mid-teen sort of a business? And how soon do I expect that to happen? As soon as possible. Sorry. Yes, it's long overdue.

And then the second question I had is just curious, I didn't see any comments about the specialty amines capacity that you've added to serve the semiconductor industry. And I'm just curious how that's contributing relative to expectations, and whether you expect to see some growth there given the strength in semiconductor?

Yes. We continue to see that coming online. It's going through qualifications as we've stated before that is going to go through a qualification of usually around 9 to 12 months. Sometimes when there's supply disruptions and so forth on chemical products as there is right now. Sometimes that can be accelerated. Sometimes it slows down actually. So I think as we look in 2026 is we're building up to a normalized run rate, hopefully, by the end of the year, we'll probably see $5-plus million coming from that this year.

Our next question is from the line of Josh Spector with UBS.

I wanted to see if I could just follow up on kind of the benzene MDI math in 2Q here. Just trying to think about, if we say volumes are stable into 3Q, you're pricing ahead of [ raws ] in 2Q, is that a headwind in that your raws are going to catch up a bit more from inventory in 3Q? Or are you exiting with enough price where you'd say that earnings in polyurethanes would be stable sequentially in that scenario?

Yes. So I would say that we are exiting Q2 able to stay ahead of the raw materials that we see going into Q3. And we're also working towards more price increases to come in that area. So -- I mean, as I sit here today looking at unless there's a cataclysmic change economically, we will stay ahead of our raw material costs going into Q3.

And Josh, benzene just settled at [ $471 ]. The point is we're ahead of that. And we'll stay ahead of it.

Our next questions are from the line of Laurence Alexander with Jefferies.

Peter, do you see any end markets where your customers are indicating already that they're in pre-buy mode?

Good question. We're in a prebuy mode. None that are really that, I mean, typically, this time of year, you're going to get some prebuy in construction. Installation spray foam business feels like it's in there's pretty good demand and people are trying, maybe, to buy ahead of the curve in that business. So those would probably be the 2 areas.

But no, again, I mentioned that earlier, it's something that we're working on very diligently. When I said that we're kind of like a day or 2 worth of inventory going in that. I think we're -- I'm not going to say that we're walking away from business. We just want to make sure we're managing that very carefully with our customers. We don't want to build up inventory, nor do we want to necessarily see it built up on the customer side.

But I guess -- I appreciate that no one wants the customers to build up inventory, but is it unusual for -- with this kind of spike where several companies are out publicly talking about imminent shortages and different molecules that people who may see higher prices in the future aren't trying to pull forward orders? Is that...

I think -- no, I don't think that's unusual at all. I don't think that we're at a point -- I mean, not [indiscernible] I don't wish we were, but I don't think [indiscernible] MDI at this time where we're seeing shortages and people saying, I can't get it. I think that there are people that are concerned as they look at their supplier with their suppliers with announced turnarounds that have been scheduled for multiple years that are taking place and so forth. Some of the disruptions that you're seeing in some of the energy flows and shipping flows. But I'm not seeing panic buying at this point, but I am seeing higher capacity utilization. So I think that there's an improvement in market conditions for the producers, but consumers can still get the product.

The next questions are from the line of Arun Viswanathan with RBC Capital Markets.

I guess we did hear about an outage with Wanhua a couple of days ago, and maybe I can just get your thoughts on that if you think that, that could tighten up markets. And then I guess maybe you were asked this question earlier, apologies if so.

But what is kind of the potential for those utilization rates to remain consistently above 90%? Do you see any permanent kind of supply activities that could arise in the next few months? Obviously, it depends on duration but of the conflict. But what are your -- are your customers kind of migrating to you in the face of other supply shocks or disruptions? Is there a share gain opportunity as well?

Yes. Arun, good question. I'm not sure necessarily what's happened with the competitor facility. When they do have multi-year closures, when I say multiyear, I mean, oftentimes, when you do a large-scale closure on a vast petrochemical side, you're renting equipment, your planning equipment, you're planning on workforces, usually 18, 24 months in advance. I mean you know these things are coming and people are exchanging materials.

I know that's happening. I've heard -- read that a splitter may have gone down or something. I've not read that a facility, there's been a large-scale cataclysmic outage, or anything like that. I think that we're probably as an industry operating in the high 80s right now depending on product flow in the Middle East. That's going to be a bit volatile right now with some of these large members.

In China, you've got single site facilities of [ 1 million ] metric ton sites. [ Wells ] go down, aside that big, you will fill it globally. And if they're down for an extra couple of weeks because of a problem or whatever, you'll fill it acutely on a short-term basis. So we'll continue to take, I think, as we look right now, our facilities are operating well, and we're in a position where we can be a strong and reliable supplier.

Okay. And then the other question I had was just on the PO market. Obviously, there's some tightness there, but there was also a reduction of capacity by one of the suppliers recently, and I know one of the other plants are down. So are you guys feeling like your own kind of procurement for the polyurethanes business is intact? Or do you foresee any supply disruptions or rerouting of your supply chain that would be required next?

No, we don't see any disruption in our PO supply right now. We've got a good supplier [ that plants ] operating, and I feel that we're covered with that. And we've also got an excellent supply source in China as well. So I feel we're okay with that.

Operator, why don't we take one more question, and we'll let people get on the way.

The next questions are from the line of John Roberts with Mizuho Securities.

Not that it's large, but maybe your Saudi [indiscernible] JV give some insights into the sustainability of the disruption. If we had an agreement imminent here on the Strait of Hormuz, what's the earliest do you think you might be able to resume full production in export by [ sea ]?

You're probably looking at 30 to 45 days would be my assumption on that. Again, there's going to be a bottleneck of [indiscernible] both to get there to pick product up, and also [indiscernible] a product to get out. And yes, so I would say about that time, 30 to 45 days.

At this time, this will conclude today's teleconference. We thank you for [indiscernible] You may now disconnect your lines at this time, and have a wonderful day.

Greetings, and welcome to the Huntsman Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. [Operator Instructions]. It's now my pleasure to turn the call over to Ivan Marcuse, Vice President, Investor Relations and Corporate Development. Please go ahead, Ivan.

Thank you, Kevin, and good morning, everyone. Welcome to Huntsman's Fourth Quarter 2025 Earnings Call. Joining us on the call today are Peter Huntsman, Chairman, CEO and President; and Phil Lister, Executive Vice President and CFO.

Yesterday, February 17, 2026, we released our earnings for the fourth quarter 2025 via press release and posted to our website, huntsman.com. We also posted a set of slides and detailed commentary discussed in the fourth quarter on our website. Peter Huntsman will provide some opening comments shortly, and we will then move into the question-and-answer session for the remainder of the call.

During the call, let me remind you that we may make statements about our projections or expectations for the future. All such statements are forward-looking statements and while they reflect our current expectations, they involve risks and uncertainties and are not guarantees of future performance. You should review our filings with the SEC for more information regarding the factors that could cause actual results to differ materially from these projections or expectations. We do not plan on publicly updating or revising any forward-looking statements during the quarter.

We will also refer to non-GAAP financial measures such as adjusted EBITDA, adjusted net income and loss and free cash flow. You can find reconciliations to the most directly comparable GAAP financial measures in our earnings release which has been posted to our website. I will now turn the call over to Peter Huntsman, our Chairman and CEO, President.

Ivan, thank you very much. As we review 2025 results, I think it is worth commenting on a bit on this past year and on our focus on 2026. I often in my prepared remarks with these words, we will continue to focus on what we can control and where we can create value. I do not say this to be repetitive, but rather to emphasize where our focus needs to be.

Our industry started this past year 2025, with optimism that North American housing was going to pick up. Chinese consumer confidence was going to recover. And Europe would finally realize their fall lease and do something to reinvigorate their industrial competitiveness. Instead, shortly after our call, Liberation Day was announced in markets and consumer confidence was thrown into chaos. China repositioned and rechanneled their trade and stood toe-to-toe against the U.S. while their domestic market slowed. Europe policymakers focused on what was making them uncompetitive and decided to double down and lost a record amount of chemical production throughout the year.

In North America, we saw U.S. housing and durable goods struggle to show any growth. Despite these hurdles, we continue to cut and restructure our cost basis, closing multiple facilities. We achieved growth in most of our tonnage that exceeded the general market while attempting to lead multiple price increases. And perhaps most importantly, we converted 45% of our EBITDA to free cash flow, a higher percentage than many in the industry.

As we look out over 2026, we anticipate a gradual recovery in North American homebuilding and durable goods as well as an improvement in the Chinese domestic markets. We are seeing some very early signs of both improved volumes and pricing in Europe. It is too early to say these increases will fully materialize, but we remain hopeful. While we don't control the outcome of these large macro changes, we will be more than ready to take advantage of any opportunities to expand margins and increase revenues should they come along and by focusing on those items we can control and conditions we can influence.

On the strategic front, I believe that 2026 will continue to be another year of changing market dynamics. Even if we start to see a recovery, we will likely see further opportunities for mergers, joint ventures, and industry consolidation. As always, we will be willing to engage with interested parties and push where there is an opportunity for value to be created. We will not be sitting on the sidelines waiting to see what comes along.

Like 2025, we have set expectations internally to, at a minimum, generate enough cash to cover our dividend. This requires more than just moving inventory about and we will continue to be focused on further structural change in how and where we do business to accomplish this. With regards to pricing and growth, we will push to grow our assets at a better pace than the general industry and do this by winning business through new product development and innovation, pushing to fill out capacities and upgrade materials through our MDI splitter in Geismar capacity increases in high-purity mines for the tech industry and catalysts and expanding capabilities in material usage in aerospace, power and the fast-evolving auto industry.

We will also be selectively using AI tools if they make economic sense to further reduce our costs, simplify our processes and expand our R&D capabilities. In short, I hope that 2026 will be a year of recovery compared to 2025. The coming weeks should signal to what degree we will see demand returning to the North American construction industry and China's moves following the Chinese New Year's, the March National People's Congress and President Trump's visit to China in early April. The next several weeks should be anything but boring. With that, operator, we'll open the call up for questions and comments.

[Operator Instructions]. Our first question is coming from David Begleiter from Deutsche Bank.

Peter, you mentioned some potential improvement you're seeing in Europe. Can you dive down into what's rating that's driving that improvement? And how long can that persist going forward in the year?

Yes. I think there's -- as we look at Europe, 2 things that we see. We see price increases that have been announced across the board, what most everyone have announced price increases. There might be one producer out there that is not. We're seeing a bit of a pickup in construction and -- as well as in auto, we also continue to see demand, not necessarily in polyurethanes, but in other divisions around the power segment, building out the infrastructure as well as aerospace.

So -- and I want to emphasize that at this very call last year, I think in my comments, I commented that everybody in North America had announced price increases as well. And all of those fell through shortly after the chaos that ensued after Liberation Day. So Again, I'm not trying to throw water on what we're seeing thus far into the quarter. But for Europe right now, I'll take anything we can get and run with it.

Got it. And just on aerospace, how much did the business grow in '25? And how much do you expect the business to grow in '26?

We expect the business to grow slightly better than the build rate. Again, I would just remind you, there's a difference between the delivery rate and the build rate. If you go to some of the airline -- aircraft manufacturers you'll see when you go to Toulouse or you go to Seattle, you'll literally see scores of planes that are waiting [ FAA ] certification. So you can see where an Airbus or Boeing can show 15 deliveries, but a build rate that is much higher or much lower than that.

Also, just as a reminder, we put a lot more product into wide-bodies than we do narrow-body. So when somebody says that they've got a record number of deliveries or production rates, we want to see more widebodies. Just as a side note, the widebody production rate is still below this year is still below where it was in that's not through lack of demand.

There's still a backlog of years and years on wide-body, pushing 10 years on widebody planes. It's the capability that both producers seem to have lost during the COVID era. So as we see that recovery in widebodies, we also have announced in previous calls, the penetration of our products and internal applications around adhesives and internal components.

So when I say that we expect to grow better than the production rate, I say that, meaning that we already have under contract, a lot of the [ fuselage ] and the wings and so forth that we've had for some years, but we are picking up new business on a per plane basis that will gradually be benefiting us throughout the year as well. So Aerospace, for us, will continue to grow slightly better than the production rates of the wide-body planes in both Airbus and Boeing.

Your next question is coming from Kevin McCarthy from Vertical Research Partners.

Can you refresh us on the amount of cost savings that you expect to flow through your financials in 2026 and where those might show up on a segment basis, please?

Yes, Kevin. We targeted $100 million of cost savings overall, which was head count reductions of approximately [ $500 ] which is almost 10% of the workforce and closure of 7 facilities. By the end of 2025, we'd actually achieved that annualized run rate of $100 million. The question is very specific to the in-year savings that we would expect in 2026, and that's about $45 million of in-year savings that we would expect to achieve excluding any impact from inflation and you should get some additional savings to come through as well in 2027.

Okay. Very helpful. And then, Peter, I wanted to follow up on a comment that you made in your opening remarks to the effect that we may see more in the way of mergers, JVs and industry consolidation this year. Were you referring to the industry in general? Or do you see opportunities for those sorts of strategic actions in the polyurethanes arena, for example?

I think both. I think that if you look -- in general, is the most direct answer I can give. But I also have to look at where there is the most payoff. That's usually where you're seeing the largest number of divestitures, closures, possible joint ventures and so forth.

I think it's something like MDI in the U.S. you have 4 manufacturers. I would imagine that the cost curve between those 4 manufacturers is pretty steady, and it'd probably be pretty tough to see a merger take place of one of those -- or 2 of those 4 manufacturers coming together. So the U.S. might be a rather limited area in the area of MDI. I look at some place like Europe, I think the cost curve, again, this is just my opinion, but the cost curve in Europe, when you look at facilities and MDI facility that would be in Antwerp or in Rotterdam, and you compare just the integration and the scale, and then you take some facilities that are far smaller where they're taking raw materials they're producing it in country A, moving it to Country B, where the processing it into MDI, moving it to Country C, where they're splitting it.

Again, you have a much greater cost curve in Europe. And I would assume that you've got leaders and laggers in Europe that you don't see in Asia, you don't see that in North America. That could easily precipitate possible closures. They could precipitate possible combination of assets taking place. And so I would say that it has to do with both the chaotic nature of the manufacturing footprint, costs and so forth that are associated with that.

But at the same time, look, the number of chemical companies there are today that produce polyethylene, for example, in North America are fewer than they were 15 years ago. polypropylene, you look at the number of companies, looking at the number of companies that are just our peers that are publicly traded. There's a general consolidation that's taking place has been taking place. And I would assume that as you look and companies have cut the cost that they've cut, I imagine most companies have taken out all of the fact that exists and probably is now maybe even carving into muscle into certain areas.

The next area that you're going to see for material cost savings is going to come about through possible mergers and so forth. So again, these are just my observations, but I continue to believe that there will be opportunities as there have been in '25 and '26.

Now does that mandate make financial sense? You've seen some very large companies that have just shut down assets some that have sold them off at a loss. Others that have sold them for almost nothing. I mean, we -- I think we were pretty public with our German [ maleic anhydride ] facility. We tried to sell it. We got to a point where we even tried to pay people to take it, and we're unsuccessful in all of that. So we probably decided to shut it down. So every company is going to vary and just because there's a deal out there doesn't mean that you've got to pursue it. But it does mean that there's, I believe, continues to be opportunity for churn.

Next question is coming from Josh Spector from UBS.

I wanted to ask about your debt covenants that were updated a week ago in your outlook. I guess if I'm doing some math right, you need to be above 6x net debt. That means your EBITDA in 1Q through 3Q needs to go up from about 60 to 80 to 100. I guess one, is that about right? Because I recall some of your prior agreements had some adjustments that maybe added some EBITDA temporarily. And two, just your level of confidence of achieving that step up if the industry doesn't improve?

Yes, Josh, it's Phil. So we posted our credit agreement and the new banking group on Friday. And if you want, you can look through all 160 pages, but I'll give you the synopsis of that good banking group, pleased with the agreement overall and you're right, the agreement has definitions of consolidated EBITDA, which are different to the adjusted EBITDA that we state publicly.

In addition to that, there are certain baskets as well. I'm not concerned at all in 2026 about the leverage ratios. I think that adjusted EBITDA, as we publicly quote, would have to drop to something well below $100 million on an LTM basis for us to even have a conversation about those leverage ratios. So I'm not concerned, and I'm pleased with the agreement that we put out on Friday.

Okay. So just there is then some sort of at or a sizable amount, I guess, to bridge that gap, which I guess I should read that document to find more of. Can you size it itself now? Or is it more complicated than that?

You have various definitions to decide it. But you can see in the details, but you've got more than a couple of hundred million dollars there and I'm not concerned in the least about those add backs and coverage ratio.

Thank you. Next question is coming from Mike Harrison from Seaport Research Partners.

Peter, I was hoping that you could talk in a little bit more detail about how you're thinking about MDI margins playing out over the next quarter 2. It sounds like in polyurethanes, you're still expecting overall margins to kind of be under pressure, but I'm curious where you might be maybe a little bit more optimistic.

Well, I think 2 things when you think about margins expansion. One is how much -- what is the industry doing around volumes, and obviously, the more that you sell out of a fixed asset, the better your margins are going to be even if pricing doesn't change, and so typically going into the March, April, May time frame, you're usually seeing demand picking up quite substantially.

I don't see anything right now, at least that is equivalent to the liberation day we saw a year ago that kind of threw people into chaos, smaller homes and simpler homes, if you will, and I remain optimistic having spoken to some of our customers and having spoken to some of the banks and lenders and so forth in this area that recovery in volume is going to be something that we should see increasing over the next 2 quarters here.

I would also hope that pricing initiatives that have already been set. We sent out price increase notifications yesterday in our MDI business in North America, largely to offset rising benzene and natural gas costs that obviously needs to happen. Just to offset the headwinds of natural gas and benzene, is similar price increases have gone into effect in Europe to offset those costs and hopefully gain some traction there.

And China will probably have to wait until after the Chinese New Year. It started yesterday. It goes into the early parts of March before we see what's happened in China, where we're seeing an RMB price today of around 14,000 for polymeric MDI. So I anticipate that we will see both an improvement in volume demand and in pricing.

All right. And then for my follow-up, I was hoping that you could maybe give us an update on the potential for share gains in spray foam insulation in North America and kind of where do we stand in terms of rolling out that spray foam insulation product line in Europe and in Asia?

Well, Europe and Asia, we're going to continue to look at opportunities there as they come and perhaps looking at third parties and so forth. Our main focus on building solutions is going to be North America. We continue to make steady progress in gaining market share.

And at the same time, we're also doing that with increasing margins. and lowering our own costs, consolidating our manufacturing footprint and providing customers with new solutions and new product innovation. So I think that our Building Solutions, [ urethanes ] preform business today is probably in as good a shape as it's been in the last 3 or 4 years. So I continue to be optimistic about the direction of that business.

Your next question today is coming from Patrick Cunningham from Citibank.

Peter, you've taken a lot of steps to rightsize the cost structure and footprint in Europe, particularly in polyurethanes. Do you still feel there's more to go from either you or the industry? And I know in the past you've been skeptical about things like antidumping or energy policy reform in Europe, but have any of the more recent calls to action or radical policy reshift giving you any more encouragement at this point?

Yes. I remain hopeful that European policymakers will eventually do the right thing. As I had an opportunity a couple of quarters ago to meet with U.S. President [indiscernible], I told us they need to do 3 things. they need to restart their nuclear refocus on nuclear production. They need to move away from this crazy green new deal that's run them into the ground. And I apologize, [indiscernible], for using the f word, but they need to start [ fracking ].

And so she said -- she took her head and said, "Yes, we need to talk." But the problem is the -- there's too much talk and there's too little action. But I continue to be optimistic that action will come about. I believe that in Europe, look, we've got 2 issues there, and I've already touched on the first one of what I consider to be a very wide structural issue with the industry of small facilities that I question just how competitive they are. Again, I don't run one of those. And so I don't know what goes on in those boardrooms and so forth, but there does seem to be more capacity than needed to satisfy the industry.

There is a pretty disparate cost curve in Europe, and Europe continues to struggle with high energy costs. And so I think that there needs to continue to be a consolidation or refocus on those 2 things. As far as our cost structure in Europe, as I look at that cost savings of $100-plus million that Phil talked about earlier. Most of those 500 reductions that we've seen in the company and the 7 site closures, sadly have taken place in Europe.

And do we have more that we could be doing there? I really strained to see where there's large material change that can happen there by cost-cutting further. I think that we want to position the business with the realization that Europe continues to be a $20 trillion economy. As much as we struggle in certain areas of polyurethanes, we continue to do very well in Europe and aerospace, in power, in coatings and certain adhesion formulations, in our thermoplastics polyurethanes and elastomers businesses.

So not all is on fire in Europe. I just think Europe is capable of doing a lot more than what they're doing. And we hope that the -- we're able to see a recovery. I'd remind you that it was just 4 years ago, our most competitive MDI produced anywhere in the world was Europe. Europe was the most profitable end of our MDI business a couple of years ago. So it can be great again, and I'll spare Phil Lister, saying, let's make Europe great again. But so we'll go on to the next question here.

Understood. And then maybe just on Advanced Materials, it seems to have a lot going forward entering into 2026. You've new wins, strong aero power businesses and maybe some stabilization on some of the core coatings and infrastructure. So how should we think about growth in '26 and any sort of latent upside or operating leverage you may have for margins and what the sort of right margin levels we should think about?

I think that -- look, Advanced Materials is going to be stable before anything else, but where we need to see the growth taking place and the margin improvement taking place is the segment of the industry where I believe we have the greatest opportunity for improvement. That's the Americas.

Europe continues to be a strong segment for Advanced Materials. Asia continues to be a strong area. And the Americans -- the Americas, and we will continue to see recovery as we see reindustrialization. We see building recoveries. We see the PMI continue to recover in the Americas. And I continue to be very optimistic about that trend.

Thank you. Our next question today is coming from Mike Sison from Wells Fargo.

Peter, can you talk a little bit about the cost curve now? You sort of mentioned that Europe used to be your highest or lowest cost or highest margin area. So where are we now maybe industry-wide for the regions? And then at some point, if things don't improve in Europe, I mean, what do you do with your assets there? Does it make sense to just reduce exposure and sell on the U.S.? Or what are the options if this downturn continues, which I hope it doesn't.

Yes, I hope it doesn't tie there. Europe's got too much potential. And I think that what we're seeing right now, our biggest headwinds were I look at our MDI production in Rotterdam versus Geismar versus [indiscernible], we have basically the same technology. We have the largest line in [indiscernible]. We have the most lines in Geismar. We look at our cost for benzene in the 3 regions is basically flat. Our cost for chlorine and so forth is essentially cost essentially flat.

The big drivers is energy is natural gas and energy costs. And so that's what fundamentally needs to change in Europe. And unfortunately, today, I think that the fees have been [indiscernible] that I'm not sure that there's going to be a fast change taking place. Now that's why we've made the [indiscernible] that we've made in the last couple of years in Europe, which I think will address a lot of these issues going forward.

The bottom line is that Europe -- if demand is not going to improve. And if they're going to leave themselves open for a cheaper product to come in from Asia and from the U.S. eventually European policymakers have got to determine if they want to protect homegrown industry in Europe. And 2 macro things need to happen. There needs to be less production in Europe and European policymakers need to decide if they want to stop cheaper products from coming into Europe.

Got it. And then just a quick follow-up on -- for the industry consolidation potential. If Huntsman ends up being a buyer of stuff, where do you want to focus those acquisitions? And then what are the potentials for Huntsman to divest stuff if things aren't going to improve longer term?

Well, we're going to -- in my opinion, we're going to have to do both. Because we don't have the ability today and we're not going to go out today with the balance sheet that we have today, we stretch that balance sheet and put it in jeopardy. So that's why I say my comments. We've got to be creative. We've got to be smart and you've got to look at things such as joint ventures or possible mergers and some sort of consolidation play.

And I think we can continue to expand and to grow the business without necessarily without going out and taking on more debt. Now if we're able to sell something or monetize something, I think we've been very consistent over the last couple of years. Our primary focus is going to be to expand our applications and the footprint that we see in Advanced Materials and we would like to invest in those type of applications.

That's not necessarily saying that we're going to go out and we have to invest in epoxy. But when we look at areas like aerospace and adhesions, and we look at the power systems and so forth. We've been looking at some of the automotive areas that Polyurethanes is participating in around [ battery podding ] and so forth. These are going to be the sort of applications and product innovation that's going to be rewarded over the next decade.

So where would we be buying probably well, first of all, going to be find whether there's best opportunity, but that's -- it would be in that area. But again, I want to end this by where I started it and that is we're not going to go out today and take the balance sheet we presently have. We're going to have to do some work before we go out and just start adding on more debt or see a material change and improvement in the industry.

The next question today is coming from Aleksey Yefremov from KeyBanc Capital Markets.

This is [ Ryan ] on for Aleksey. Peter, I wanted to go back to some earlier comments, I kind of found quite interesting around affordability and maybe some improving conversations with customers I was just wondering, are you maybe seeing improved order patterns from customers kind of ahead of maybe upcoming construction season? Or is there something else on the radar? Just any additional color there would be much appreciated.

I think that it's simply too early to say, and I'm not trying to -- the [indiscernible]. We had a very cold East Coast, everything east of the Rockies in January, December and I think that if anything, we're probably going to see a little bit of a delay of probably a couple of weeks.

We typically start to see construction orders start coming in about the middle of February about now and start building up through the month of March. And so that by April, you're seeing the full impact of a what I would call a construction season. That obviously can be delayed through weather. It can be delayed in Asia because of the later Chinese New Year, which is what we're seeing this year.

So I think between late later-than-usual Chinese New Years and a colder than usual winter months that we saw in North America. Now I did say earlier, we are seeing what I would consider to be green shoots. And I want to emphasize again, very early green shoots in Europe, about a little bit better demand and pricing traction than we've had the last couple of years. So -- that's that -- again, I'll take anything I can get at this point, and we're going to nurture that and we're going to see -- make the most of that.

Right. Okay. That's helpful. And I was just curious, can you -- you guys had some comments in the prepared remarks just around kind of the inventory levels in the U.S. But I was wondering if you could maybe comment on where you believe MDI inventories are in both Europe and Asia.

Are you talking about our inventory levels or that of customers and the industry in general?

Just the industry in general.

I would say ours are very low. And again, I cannot speak for every customer that's out there, but just anecdotally, it feels like the supply chains between us and the consumer is quite low. And I -- it's all companies right now in that supply chain are trying to control cash and trying to control inventories and working capital.

Building suppliers, OSB producers, auto industries that are having to write off billions of dollars on EVs and so forth. They're all focused on cash right now and inventory control. So one of the unknowns that we may well see going into '26 is -- I'd say this is having lived through a bunch of other sudden rebounds in the industry. This industry typically does not recover over the course of 4 or 5 quarters.

It usually gets to a point where people realize products are tight. And all of a sudden, we can't restock in time for a demand upswing. And all of a sudden, you find out their shortages. And when you look back in 2018, we look back on every couple of years, this seems to happen. I wouldn't be surprised if that were to happen in '26 in certain regions of the world.

Our next question for today is coming from John Roberts from Mizuho Securities.

Are you seeing any significant decline in price for merchant chlorine in the U.S.? One of the major U.S. suppliers talked about significant weakness in the merchant chlorine market.

No. I think it's been pretty steady. I'd love to see it collapse, but it's been pretty steady.

Okay. And then sorry, I've forgotten that Europe was actually the most profitable MDI region for you. I think that it was less disadvantaged few years ago, but I never really thought it was advantaged. What was the source of the advantage that Europe had over the rest of the world?

We had -- again, I'm speaking for Huntsman. I'm not speaking for our competitors. We had a lot of downstream business, more downstream business in Europe 5, 6 years ago. That went into our elastomers business, TPU, went into our system houses. We had more system houses there than we did any other place.

And we also had lower chlorine and [ caustic ] prices and our auto business in Europe used to be one of the most profitable segments we had anywhere in the world. Today, that auto segment that's most profitable is in China. Again, I think we still have a very good auto segment in Europe and very good one in the U.S. But we're seeing the same trends that a lot of other companies are seeing.

Next question is coming from Matthew Blair from TPH.

Peter, could you talk about your expectations for global MDI capacity growth in 2026. I think there's reports that one of your U.S. competitors is looking to add capacity this year. I think that would raise global capacity by roughly 2%. Is that -- do you agree with that? Is that something you're seeing as well? And do you expect any material increases in Asia MDI capacity this year?

Well, Asia hit that first. Asia continues to be our most profitable MDI market and supposedly the one that's most oversupplied with MDI. There was a lot of talk earlier in '25 that with the tariffs going up in the U.S. that a lot of that Asian material that was going into the U.S. had merely washed back into Europe and into China and flood those markets.

We have not seen that take place. So as I look at capacity additions in China, I think that they may well be coming on, but I question how much impact they're going to have and we're not seeing that material necessarily leaving China any more than it has over the last couple of years.

In the U.S., yes, I think we are seeing the impact of some of that incremental debottleneck some of that expansion that's been taking place over the last couple of years with one of our competitors here. I would remind you that typically, companies go out about 12 -- 6 to 12 months before capacity comes into the market, and you start cutting deals, you start talking to people about pricing and what you don't do is bring up a new line of 50,000 metric tons, for example, and all of a sudden tell you your sales and marketing, we'll go sell it now that we're producing it. And so the impact of that volume coming into the market, which from what I've publicly read is sometime in the middle part of this year.

I would say from a pricing point of view, from a supply point of view, is probably being felt in the fourth quarter of this last year and the first quarter of this year. Having said that, we are talking about an expansion of about, what, low to mid-single digits in North America of actual capacity that's coming in. So I'm not sure that it's going to have a material adverse change to the market.

Great. And then is there any major turnaround activity we should be on the lookout for later in the year for Huntsman? Like any sort of MDI downtime in Q2 or Q3 that we should be aware of?

No. Just our normal turnaround activity. We had the once in 4-year major Rotterdam turnaround last year. But normal turnaround activity across all 3 regions. We do have to make sure that our plants remain reliable. So there will be periods of planned outages, but nothing abnormal.

Next question today is coming from Laurence Alexander from Jefferies.

This is Dan Rizzo on for Laurence. I have questions just based upon something you mentioned before about kind of focusing on wide-bodies within aerospace. I was wondering if getting into narrow-bodies as a focus, how it's done, what the sales cycle is like or if that's an opportunity in the coming year and years.

Well, it won't be an opportunity until they start redesigning the 737 and the 320 Airbus. And I say redesigning, that would be a major, major overhaul by now making carbon fiber wings and infused launches and so forth. So you've -- I don't see that happening anytime in the foreseeable future.

Again, I think you're going to see opportunities to have new adhesions and so forth, applications going into the narrow-body and plans incrementally move towards lightweighting and so forth. So that's an area of focus that we continue to have as to how do we have greater penetration into the narrowbodies. But as far as all of a sudden, they start making composite wings or [ fuselages], love to see it, but -- that would be a major change to the design of the plan.

Next question is coming from Frank Mitsch from Fermium Research.

Peter, I never thought I'd hear you say the f word, let alone on a conference call.

It was quite revealing to say it in Europe of all places, too, when I think I may have been thrown in jail.

And for the record, if anybody dialed in late, he said fracking, so -- just to clarify that. Speaking of clarifications, let me come back to the consolidation question that was asked by a couple of other people. I mean earlier this earnings season we had company overtly state that was open for selling the company. And you obviously said, hey, look, we're willing to engage with interested party and create value where there's an opportunity to do so. Is there any -- should we be reading through the lines on Huntsman here in that regard? Or how would you address that?

No, I would -- look, the standard answer that we give on something like that is we don't comment on rumors or M&A activity. In this case, I would say that it's -- no, we're not in a sale process today or anything of that sort. I think that as we look at it, we just -- we see and you hear a lot of companies that are talking about they're studying the future of their division x or they're looking at consolidations or they're looking to shut down assets and so forth. And wherever you see [indiscernible] usually you see opportunities. So I wouldn't read more to it than that.

Our next question today is coming from Jeffrey Zekauskas from JPMorgan.

Thanks very much. In the first quarter, your polyurethanes range, first quarter of '26 is $25 million to $40 million in EBITDA. And last year, you made $42 million. So is the reason why your urethanes EBITDA should be down is that prices are lower year-over-year and that I would expect that volumes would be higher?

And why is the range so big? And what's the difference between the lower end of the range and the higher end of the range? Do you need to get prices up in the first quarter? What's the real dynamic there?

Well, we do need to get prices up in the first quarter. We've got rising natural gas costs in the first quarter. That right now, as I sit here right now, represent about a $10 million headwind that we weren't anticipating a couple of weeks ago in our polyurethanes business. So yes, I do see some headwinds. I do see that coming down.

I would remind you that as we look at the first quarter of last year's [ 42 ], that was coming off of the fourth quarter. I don't want to get into too much detail here. That was coming off of a fourth quarter in 2024, [ 50 ] and leading to a second quarter of 31 of this last year. So we were seeing a polyurethanes businesses last year that was in a nose dive, if I could put it mildly. And I look at polyurethanes this year, I certainly have more optimism in the market. We are starting it from a low basis, obviously, in the fourth quarter going into the first quarter.

I do hope that we're able to do better than that median range and that adjustment, the range that we gave literally, we argued about that just over the last couple of days internally because of the headwinds that we're seeing and as we look at natural gas prices, this very weak in Europe are starting to come down.

So again, this is something that if we were to have this call 2 weeks from now, it could be maybe a few million dollars difference one way or the other. But I think directionally, we're seeing volumes coming up. We're pushing prices. And I would say that the business is heading in, it's certainly in a different direction than '26 than it was in '25.

Okay. And when you look at polyurethanes prices for Huntsman, did they sequentially move lower through the course of 2025? And then for Phil, is your base case that working capital is use in 2026?

Yes. I'll let Phil answer the working capital. in 2025, yes, we did see pricing pressure on a downward basis in all 3 regions. That was being -- pricing actually came down in Europe and the U.S., about the same, started higher in Americas. It's still higher in the Americas today, but both came down about the same amount throughout 2025 and Asia, less so.

Yes, from working capital, if we didn't do anything, can you assume that economic conditions are better at the end of 2026 and they were at '25, therefore, you've got more revenues, more receivables, you'd expect a use. We have a number of programs in each of the individual items of working capital, inventory, AR, AP and fully expect and target that our cash conversion cycle, which we reduced by 10% in '25 will again be a reduction in 2026. And therefore, we would be targeting overall an inflow absent significant changes to the macroeconomic environment.

Next question is coming from Hassan Ahmed from Alembic Global.

Peter, a couple of quarters ago, I believe it was Q1 of 25 million Actually, maybe it was Q2, you mentioned that sequentially in polyurethanes, you guys see an 8% to 10% volume uptick and you only saw a 3% volume uptick in Q2 last year. So obviously, I mean, liberation tepid demand globally, presumably all those factors went into that. As you look at Q2 of this year, particularly keeping in mind some of the lean inventory comments you made, could we be gearing up for a pretty big sort of volume uptick within polyurethanes?

It all depends on the macro issues around the construction season, and we'll certainly know that by the end of March. I would -- in my opinion, it's mostly going to be around construction. And that will lead to construction demand also led to increased -- usually increase durable goods in North America. And that is -- that's where we had our biggest miss this last year.

So again, and at the same time, remember, Hassan, we're also going to be pushing through price increases. And it's -- you've got to balance that very carefully as to how much do you want to increase prices and push for price increases and hold the line on pricing and how much do you want to go after volume. So it's a tough line to walk. And will follow the macro economic indicators.

Very helpful. And as a follow-up, I mean, again, it seems that -- just from the sounds of it, you seem a little more comfortable about pricing as it pertains in polyurethanes as it pertains to North America, particularly keeping in mind this incremental capacity that's coming online, is it fair to assume that we should see a healthy pricing trajectory in North America despite this capacity coming online, particularly keeping in mind some of the comments you made about how -- I mean, you sort of presell ahead of this capacity coming online?

Yes, Hassan, you've got to remember, I am my father's son. I grew up in a household where [ polystyrene ] was considered to be the greatest petrochemical product ever produced -- and so yes, I'm always going to be pushing for better prices. I'm always going to be optimistic about demand and pricing and so forth.

So take what I say with the grain of salt in those areas. I would say that it is simply too early to say in the North American market. and largely to the Chinese market, which you well know that the pricing in China is usually going to be the 2 weeks or so after Chinese New Year is over, usually you see quite a bit of volatility, hopefully upward pressure on pricing there.

North America, it's just too early to tell. -- again, we've got pricing announcements that are going -- that have gone out to our customers. And we're also seeing some pricing announcement and some small bits of traction in Europe. On pricing as well. But I don't want to get the wagon ahead of the horse here, so -- and say that somehow, I'm announcing that we've been successful in getting prices through in Q1. We've made the announcement they will likely see the impact in Q2, if anything, and we'll continue to push for that.

Our next question today is coming from Vincent Andrews from Morgan Stanley.

This is Turner Hinrichs on for Vincent. What drove the less severe than expected seasonal drop in Polyurethanes last quarter?

So polyurethanes overall in North America grew slightly, and that's really around some of the business wins that we've seen in the early part of the year. I don't think there was anything material that we saw in quarter 4, which was particularly different. We saw in polyurethanes in Q4 was that the outage that we'd expected in Rotterdam to last a little bit longer actually was a little shorter, and therefore, that provided some upside overall.

In terms sequentially, you still saw seasonality in North America. What we said in the prepared remarks was December, we were maybe a little bit more aggressive in terms of how we thought there would have been more of a seasonal decline business last year, you still saw the normal seasonality.

Makes sense. So as a follow-up, we're about a year into significant tariffs having been placed on U.S. MDI imports. And I've seen trade reports that indicate imports of Chinese origin MDI have dropped something like 80%. Could you speak to how you've seen tariffs play out in terms of regional demands dynamics?

Yes. We've seen those same numbers, the public data on Asian imports. That doesn't mean that Asian players are not bringing product in from Europe. But that poses a number of questions in and of itself on the economics behind something like that. I am surprised this past year to see the amount of product that is coming in from Europe, particularly around smaller sites that I wouldn't considered to be very competitive, but what do I know?

If I mentioned earlier, again, this is just -- I'm not speaking on behalf of the company, it's my own thoughts. I mentioned earlier about a rebound that can suddenly happen. And as I look in the North American market, if you see a rebound in housing, and I'm not talking about a historical recovery in housing. But if you see a usual, maybe a little bit better than usual, certainly better than last year, rebound in housing.

With the constraints that have been put into place by tariffs and just by the macro economics, tariffs not the only thing that discourage trade as well. I could see that a scenario where you could see the U.S. running into supply issues before other areas of the world. And again, I'm very clear. I'm not saying that I'm going to see a rebound here in Q2 or anything.

I'm just saying that as you look at that fundamental basis where the U.S. used to have a pretty healthy chunk of its production of its supply side, at least, being satisfied by imports that have been cut off. U.S. -- in my pin, U.S. will probably be the first to field tightness should that occur.

Our next question today is coming from Arun Viswanathan from RBC Capital Markets.

This is [ Adam ] on for Arun. Maybe if we could zoom out a little bit, a little hypothetical. So do you think mid-cycle earnings levels for [indiscernible] could be maybe through the end of the decade because I think peak earnings was kind of in the $1.5 billion range, maybe mid-teens margins this year was [ $275 ], closer to mid-single margins. Assuming some of those normalized volumes you're talking about normalized cost inputs, do you think the business could get back to an $800 million or $900 million EBITDA range in that 10% margin? Or do you think -- some of this is structurally impaired from asset closures in Europe and [indiscernible]?

I think that we still have the production capabilities to generate those sort of EBITDA. A lot of that is going to be how does Europe land. And Europe for us used to be 1/3 of our EBITDA. And you've got 1/3 of our business today in polyurethanes that's struggling in comparison to the U.S. and Asia. If Europe gets back on its feet from an industrial point of view, that doesn't mean that it becomes a global leader, but just kind of recovers back to where it was.

Yes, I would hope that we would be able to get back to those sort of numbers. We still have the same amount of tonnage of MDI that's being produced around the world. We have the same fundamental capacity to produce production in our mines and in our performance products in our Advanced Materials. We've taken out, obviously, a lot of costs, a lot of people. We've taken out some of the downstream system houses and so forth. But that hasn't necessarily eliminated our ability should we see an economic recovery in Europe? And should we see the U.S. housing market go back to its normalized levels. Yes, I would think that we have that opportunity.

Okay. That's great. And I know there have been several questions on the MDA pricing in Europe. Have you been able to quantify any of that? What are those price increases that you're aiming at? I know maybe not all of those will flow through. Just curious where you're going for.

In Europe? I would -- yes, I think it's just too early to speculate as to what we're in the process right now negotiating with a number of customers and so forth. I would very much like to see us at least be offset our raw material increases that we're seeing. And that's going to be a tug of war through the first quarter.

Next question is coming from Aaron Rosenthal from JPMorgan.

This is [ Elan ] for Aaron. Can you walk us through the moving pieces on the revolver quarter-over-quarter. Did you fund on the new [ RCF ] to repay outstanding the outstanding amount at year-end? And if so, what's the balance today? And do you have any plans to term out the balance via new debt? And finally, just curious if you would have any interest in tapping your equity to help shore up the balance sheet.

Now on the final comment. So new revolver, as I said, I think we're extremely pleased with the strength of the banking group. We've got -- we've moved to an $800 million revolver. The way that I look at it overall is we have an $800 million revolver. We extended our maturity and also the capacity on our securitization program, which now adds up to approximately $300 million. And at year-end, we had over $400 million of cash, so overall $1.5 billion and we were borrowing approximately $500 million across our securitization program and our revolver. So that gives a net amount of approximately $1 billion moving forward.

To your question around terming out any of the borrowing. Obviously, we've had that discussion as we've moved through the revolver process. I don't see that as necessary as we sit here today. we've managed to put in place an accordion up to $400 million, which we could tap into as a durable up cycle unfolds over the next 18 to 24 months. And I take a look at the overall capital structure, which I think is pretty much aligned with the portfolio that we have. So I think we're comfortable with where we sit today, but we're always looking at our capital structure in light of the extended trough that's occurred in the chemical industry.

Operator, why don't we take one more question. I think we're at the top of the hour. So we'll take one more and then wrap it up.

Certainly. Our final question today is coming from Salvator Tiano from Bank of America.

I just want to go back on the capacity additions in the U.S. that you were asking about before. Firstly, if I heard correctly, I think there was a mention that it's low to mid-single-digit capacity growth in North America. And I just wanted to check with your industry intelligence, Essentially, what are you seeing in terms of the actual number?

Because at least what we've seen from some trade publishers talks about more of a 20% or more increase in the 1-point-something million ton market? And secondly, Peter, you mentioned that you saw most of the impact already in Q4. I'm just trying to understand, if I were to think like a buyer of MDI and inventories in the supply chain are very linked, as we've said before. How would they be already benefiting from that capacity addition coming midyear, if I cannot restock anymore and they have to wait. I wouldn't theoretically, that means that all the pricing be all the pricing impact will only come when the new capacity comes online because there's no opportunity for a seller -- sorry, a buyer to restock further?

Well, okay. So I'm not trying to avoid an answer to the question, but you're asking me to kind of get into the mind of the person who's bringing on the capacity, which I have in the [indiscernible] side did just because that capacity is coming on doesn't mean it's all going to come on, on one day, and it's all going to flood the market in one day.

Oftentimes, it takes quarters to be able to integrate and to be able to bring on capacity. And I know in our case, when we've brought on capacities in the past, it sometimes takes you up to a year to sell the product out. You're not going to want to bring on 100,000 tons of new product and somehow sabotage your existing 500,000 tons of product that you've got -- that you're already selling by cutting costs and so far by cutting prices.

So how a certain competitor or producer will bring on capacity, when they bring it on, what impact they want to have on the market and so forth is all yet to be seen. And my comments were that earlier that I believe as we have seen in the past with this particular producer, product is blood into the market usually on an as-needed basis. The obviously, we'll probably be expanding their footprint.

But how they do it and how soon they choose to do it and what impact they choose to have on the market, that's kind of out of my -- I just simply don't know. But again, I -- it's very, very rare that you all of a sudden see 100,000 tons start up on Wednesday and it floods into the market, and you're going to be seeing that lower margins and lower price immediately.

We reach the end of our question-and-answer session. And that does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.

Greetings, and welcome to Huntsman's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ivan Marcuse, Vice President of Investor Relations and Corporate Development. Thank you. You may begin.

Thank you, Donna. Good morning, everyone. Welcome to Huntsman's Third Quarter 2025 Earnings Call. Joining us on the call today are Peter Huntsman, Chairman, CEO and President; and Phil Lister, Executive Vice President and CFO. Yesterday, November 6, 2025, we released our earnings for the third quarter 2025 via press release and posted to our website, huntsman.com. We also posted a set of slides and detailed commentary discussed in the third quarter of 2025 on our website. Peter Huntsman will provide some opening comments shortly, and we will then move into the question-and-answer session for the remainder of the call.

During this call, let me remind you that we may make statements about our projections or expectations for the future. All such statements are future looking statement and while they reflect our current expectations, they involve risks and uncertainties and are not guarantees of future performance. You should review our filings with the SEC for more information regarding the risk factors that could cause actual results to differ materially from the projections or expectations. We do not plan on publicly updating or revising any forward-looking statements during the quarter.

We will also refer to non-GAAP financial measures, such as adjusted EBITDA, adjusted net income or loss and free cash flow. You can find reconciliations for the most directly comparable GAAP financial measures in our earnings release, which has been posted to our website.

I'll now turn the call over to Peter Huntsman.

Ivan, thank you very much, and thank you for all of those taking the time to join us this morning. Before getting to our Q&A, I'd like to take a few minutes and speak about present market conditions. First of these is the change in our dividend distribution. Every quarter, our Board of Directors deliberates and spends considerable time discussing this matter. We take into consideration a number of factors in determining what should be paid and what should be preserved.

Our industry faces three challenges that in their duration and magnitude are unprecedented. First, we see the U.S. economy, the effects of several years of decades high inflation and the rising of interest in mortgage rates. This has put enormous pressure on consumer durables and home building. in particular, fewer and smaller homes are being built and consumers are spending less money on large durable items.

The second is the lack of consumer confidence and spending in China. While at the same time, the country has built out their manufacturing capacity that is not being absorbed domestically and in many cases, are flooding markets that struggle to absorb their own domestic production and increased imports.

The third of these challenges is the deindustrialization of Europe. Between burdensome bureaucracies and regulations, high business and climate-related taxes and uncompetitive energy and raw material costs, Europe is not attracting innovation, growth or investment. In fact, in the second half of 2025, we're likely to see more industrial closures than we have seen in the first half. We believe that the U.S. and China economies will recover to more stable conditions as trade tensions ease, interest rates drop, and consumer confidence in spending returns. Europe will see more of its manufacturing leave unless they change a number of policies very quickly.

As industry shuts, it will be relocated to the U.S., Asia or the Middle East. As these capacities relocate, we will see these markets stabilize as the remaining European companies adjust the new supply chains and perhaps a more consolidated industry.

Aside from simply waiting for better times, what will Huntsman continue to do. We will continue to calibrate our cost structure to the market realities that we're seeing. We are on track to completing our previously announced $100 million cost reduction program. This includes the elimination or relocation of over 600 positions and the closure of 7 sites, mostly in Europe. These efforts will continue through 2026, and we're well on track to meet and likely exceed these targeted savings of $100 million.

In addition to cost and asset footprint, our priority has been to manage our cash consistent with a prolonged downturn. We delivered $200 million of operating cash this quarter, and our year-to-date free cash flow is over $100 million. We moved early and aggressively on working capital this year, and I believe we made the right call to do so. We're also looking at more energy-intensive raw materials and exploring ways wherein we can source these supplies from other regions with more competitive costs.

Europe will continue to be a vital market for our company, areas such as aerospace, automotive, adhesives and electronics will not only be profitable, but growing markets for Huntsman. However, we need to continue to look at our supply chains and source the most profitable raw materials.

An example of this is our recent closure of our maleic facility in Moers, Germany. We will continue to support our maleic customers in Europe, but we will do so from the U.S. where we can make maleic cheaper and deliver it at higher margins. We'll continue to look at our urethanes, amines and epoxy supply chains and assess how we can avoid Europe's uncompetitive cost structure. These include working within our own company as well as working with other industry players.

We will continue to work with other manufacturers to maximize our capacities and competitiveness on the products we produce and supply globally. This includes exploring opportunities for consolidations, rationalizing capacities and other value-enhancing combinations. I believe that our actions will create further value. Not all of them will happen, but we will continue to explore every chance we have. We also need to make sure that we protect our balance sheet for the long term.

Our latest dividend levels were set when market conditions were far different than they are today. Our priority was to return cash and value to shareholders. This priority has not changed. It has taken into -- but it is taken into consideration current market conditions. These are not times when we ought to be taking on more debt to pay a higher dividend. After careful deliberation, we believe that we have found the right balance to reward our shareholders, preserve our balance sheet and invest in the future. As soon as market conditions warrant, consideration for an increase in our dividend payments will take place. Believe me, we'll be doing this as quickly as possible and I hope this happens sooner rather than later.

Lastly, as we look into the fourth quarter, it is simply too early to make forecasts for 2026. Most supply chains are very tight, visibility is short term as it usually is this time of year. I believe in the fourth quarter that we will see typical seasonality, coupled with a higher-than-average destocking.

Earlier this year, some companies bought into the idea that Europe were somehow rebounding and demand was picking up. This has clearly not been the case. We may see conditions in the fourth quarter, especially in Europe, where prices drop as companies cut push to cut inventories and manage working capital.

During the fourth quarter, we will continue to prioritize cash over EBITDA, especially in our Performance Products division. Our objective is to finish this year with inventories that allow us to produce to meet demand. As we end the third consecutive year of challenging markets, in all three regions of Asia, North America and Europe. I believe that we're taking the tough steps today to assure our future is one where we are able to recover quickly as market conditions allow us to do so. We will continue to explore every means and structure possible aside from simply waiting and doing nothing.

With that, operator, we'll open the line up for questions.

[Operator Instructions] Today's first question is coming from Mike Harrison of Seaport Research Partners.

I just wanted to ask about the cash flow and the inventory reduction actions that you took during Q3. It sounds like your expectation is there's still some further inventory reduction that will happen in Q4 as you continue to focus on cash generation. My question is, though, what do these inventory reduction actions mean for your utilization rates, particularly in Q3, where you're running a little bit slower and will that continue into Q4? I guess my question is, are you running slower now so that you can run harder potentially in the first and second quarter of next year?

We look at them on a -- literally on a product-by-product and division-by-division basis. So if you think where we'll be in the first quarter, we're typically starting to build inventories as you go into the second quarter, which is typically the beginning of your construction housing season, obviously, that's weather-related and it's also demand related. People are looking to relocate into the summer months. And so you see a lot of buying activity pick up at the time. So typically, across the entire company, you will see inventories rise during that first quarter going into the second quarter in preparation of demand. Now the demand doesn't necessarily build and I think 2025 was a good example of that. We really saw a very muted construction market, particularly in North America versus expectations. And you then see that partway through the second quarter, you've got too much inventory.

Some of our products such as your MDI materials, not -- this doesn't apply to every single grade of product we produce. But to the more commoditized materials in MDI, polymeric and so forth, you can typically reduce that inventory by selling it into other markets into other applications even into export markets and so forth. I'm not going to say that's easy and I'm not going to say you can do that fairly quickly. But you typically can take care of your inventories through proper management usually within a quarter or two. Other products like your performance products, where you're producing amines that are going into catalysts, you're producing maleic anhydride, it goes into unsaturated polyetheresin. You've built up your inventory early in the year and sometimes it will take you longer to reduce those inventories fewer customers, fewer outlets and so forth to get rid of that inventory. And so you typically -- that will happen through the third, and in our case with Performance Products, through the fourth quarter.

Now you've got a decision to make -- you asked a very good question that you reduce your production rates thereby lowering your inventory so that you can meet production demand as you get into early 2026. I believe that we have an opportunity to see a modest recovery starting in 2026, but I'm not willing to bet our inventories on it. So let's go into 2026 with our inventories, I would say, lower than average where we can calibrate our production to the actual demand as we see the demand.

I think probably by and large. I can't speak for our competitors, but I -- probably as an industry, after 2025, and the muted market -- the muted recovery that we saw in early 2025, at the beginning of the construction season, I think that people will probably be cautious going into 2026. And therefore, I think that's why you're seeing a lot of companies right now focused on the working capital, focused on inventory reduction and perhaps putting their free cash flow and cash generation ahead of EBITDA.

In the case of our MDI business, I believe our inventory levels were not perfect. I believe that they are in the area where we want them. Performance Products, I believe they'll be there by the end of the year. and barring any huge change in demand one way or the other. And so yes, in the fourth quarter, I think that as we look at Performance Products, in particular, not very encouraged when I look at the EBITDA outlook versus the fourth quarter. But I do look at it as somewhat of a one-off because we are going to sacrifice some EBITDA to get rid of what I think is the last of that inventory.

Sorry, that was a very long-winded answer, but a very good question.

Our next question is coming from Patrick Cunningham of Citibank.

Peter, in your opening remarks and over the past couple of years, you talked about the continued collapse of European manufacturing, and you've already been quite proactive here with positioning your own footprint. I guess my question is, is there a risk that enough capacity leaves that it no longer becomes attractive for suppliers to support some of these industrial clusters if there's enough link in the chain broken and perhaps maybe down the road, you need to evaluate your Rotterdam asset as well. So maybe just directionally comment on how you're thinking about the asset footprint for Huntsman specifically, and that sort of tail risk to the industry? Or what's left of it?

Yes. And Patrick, what I don't want to do right now is try to predict too much of the future, but it is something that we keep a very close eye on. We feel very confident that our first-tier suppliers that are giving us chlorine, giving us CO2, giving us our raw materials and so forth in Rotterdam, in particular, our ability to import in benzene and so forth. We feel that, that is a very good position by what we see today.

Now do I have inside information on what's going on? I don't, but we communicate with those first-line customers. You do bring up a very good point though, what happens if a supplier of a supplier of a supplier, you can take that back two or three steps and you start looking at the refining infrastructure or you start looking at the pipeline infrastructure, is there enough product going in to run the pipeline system. That may be something that is not only out of our control, but out of the control of our suppliers and so forth.

I don't foresee that happening in the near term. Is it something that could happen two or three years down the road? I'd be surprised to see it get that bad where you start seeing a collapse of these clusters. I genuinely think there would be such an economic calamity that the government would probably step in on some of these things, but I'm just surmising. I try to get into the head of a European beer craft not only very nebulous, but dangerous. So we won't try to do that, but I feel that at least for the foreseeable future for us for the coming years and so forth.

Rotterdam is going to continue to be a low-cost European site. It's our -- feeds into our second largest MDI market. And I think that we have some work there to get that site more competitive on a global basis. We continue to work with our suppliers, with our partners, with our customers and looking at anything and everything that we can do on that side. But yes, that's -- you bring a very good point. It's something that we are in continuous discussions with our suppliers.

The next question is coming from John Roberts of Mizuho Securities.

Do you think the increased U.S. MDI imports from Europe is a structural change, and that's here to stay?

I hope not. I can't imagine that it makes any economic sense, but I'm just speaking if looking at our economics and is that a good deployment of capital. But John, you bring up a very good point. As we look at the U.S. market of around 1,200 kilotons, you've got roughly 75,000 kilotons coming in from Europe. You've got roughly another 150,000 kilotons that will be coming on this next year. And I would remind you that it's usually not when the kilotons come into the market when you feel the impact of it, it's usually the year before, right? When people are out pre-marketing, preselling, pre -- cutting the market to try to find a place for all of that inventory as it comes in. And you still have a lot of Asian material that's going to Canada and Latin America that is displacing U.S. exports from the United States producers that are typically exporting to Canada in those markets as well.

So I think that it's -- there's going to be moments of opportunism where people maybe have too much inventory, can't move it in Europe and so forth. But fundamentally, the economics of moving from a higher-cost region, paying tariffs, taxes, transportation, logistics, working capital tie-up and so forth into another market. I'm not sure that's a good long-term decision, but that's not my decision to make. Well it is for Huntsman. We don't do that.

Yes. The Chinese gasoline market is now declining. So is your MTBE JV production in China having to be exported? Or how do you see that as the Chinese gasoline demand continues to decline?

That MTV is both an export and a domestic market. That's a very competitive site. That's a world-scale side, and it's one that we're going to take advantage of both domestic and export opportunities and wherever the best opportunity is, that's where we'll be.

The next question is coming from Aleksey Yefremov of KeyBanc Capital Markets.

Peter, can you just maybe overall describe the U.S. MDI market. You just made some comments, but what about demand side, overall U.S. MDI inventories and how customers are sort of reacting to the tariffs and change in imports picture? Are your conversations with customers changing at all?

No, not a great deal. I think that there may have been a lot of hyperbole so forth that went into the tariffs that you somehow were going to foresee or see these great changes and so forth. But like I said, the U.S. is a 1,200 ton market. And you look at the amount of tonnage that is being added on in the next 12 months, kind of 150,000 kts from one producer. Predominantly, another European producer bringing this last year about 75,000 metric tons. You look at the amount of product that was exported to Latin America and Canada that now is kind of set back into the U.S. And you can kind of see where you kind of take last year's fourth quarter, this year's first quarter was something like 100 kilotons that came in from China, and you more than offset that, right, with new additions and imports coming in from Europe.

So I'm not sure that there's really a big net change in production. I'm not going to say that it has no impact. I'm sure it does on those, particularly having to pay 513% anti-dumping tariffs. But it's -- for us, we've seen this last year, year-over-year, about a 6% growth in MDI. That's something that we've gradually, through over the last 12 months, have gotten back, largely gotten back market share that frankly, we lost and we probably took too aggressive of a price stand and trying to keep prices stable or even rising in a market that surely needs it.

So for us, it continues to be a sluggish market. And I think overall, there will be pockets of growth within MDI U.S., but until housing, fundamentally, until housing recovers, I don't think you're going to see the sort of demand that we've seen historically.

And as a follow-up, you talked about automotive wins in Advanced Materials and also some progress on the power side, aerospace, do you think AM could qualitatively be decently stronger next year?

Well, on the -- you brought up three very good markets there. On the electronics side, I'd remind you, that's about 40% of our earnings. And that's probably the most boring unknown segment in our business. I'd say boring because it's just a year ago or in 2018 the business made up about 20%. Today is 40%. So the business for us has doubled over the last 7 years. So that's -- we've seen phenomenal growth at a time when a lot of businesses have been flat to down during that period. And I think that over the course of the next decade, electronics and power is going to continue to grow. So that's a very important end of our business. And I'm not sure that if the economy turns around and picks up, that we're going to see big growth in that area, we would in automotive or aerospace.

And sorry, but all three of these are kind of different. Aerospace will not be about consumer spending or consumer demand. Aerospace will be largely around Airbus and Boeing's ability to build more planes, and to deliver that which they have built. So you look at all the publicity recently on the 777X, a platform that has Huntsman material in it. I had the opportunity to visit the Boeing site of was it three years ago? and you've got -- you had XXX jets three years ago that were sitting there waiting for delivery. Now the FAA says those planes probably won't be delivered until 2027. So planes have been built and sitting there for 5 years. And so it's not just a question of planes being built. It's a question of planes being built and delivered. It's two completely different things. So if the aerospace industry can increase build rate and delivery, that will be great.

Electronics, that's largely going to be around the ability for infrastructure to be built, infrastructure to be modernized. If you start bringing in more renewables, more wind and solar and so forth, that's going to be powered.

On the automotive side, that's going to be more consumer-driven. But still, we're seeing there that the automobile producers are rewarding lightweight, that's energy conservation, both for EVs and ICE. And they're also rewarding innovation and new chemistries. And that's a lot of battery materials and plotting materials and so forth, strength materials that are going into the EV.

So Advanced Materials, in all three of those sectors. As you see, the build rates improve in Aerospace, see the continuation of the build-out on the power grid, you see consumers' demand continue to improve, hopefully, in the automobile area you ought to see all of those things. Some will be consumer driven. Others will be infrastructure-driven and others will just be the ability for manufacturing to get it right.

The next question is coming from Vincent Andrews of Morgan Stanley.

Peter, it sounds like in the EU, you're already hearing from customers that they're going to be doing some early shutdowns for the holidays and so forth. Is that correct that you're already pretty well aware of this? Or are you just really projecting it?

I think that we're projecting it at this point, I have not heard even anecdotally that we're hearing automobile segment customers or anybody else. We'll see normal seasonality in the fourth quarter. I think that where you might see more of it is perhaps on the chemical side, not on our customer side, but those of us that have to build inventories before the construction season or do you think that if the economy is going to be turning in the second quarter, there's a lot of people who are saying would be the case in Germany, we better start building inventory to match that demand that's coming down the pipe.

Typically, you don't see that with OEMs in the automotive industry and so forth. They're not building big inventories and so forth for seasonality. So when I talked about companies perhaps building too much inventory and diminishing some of that in the fourth quarter in pricing and so forth. I would say that will apply more to the chemical industry than our downstream customers.

The next question is coming from Josh Spector of UBS.

I was wondering if you could talk about kind of how you size the dividend cut, what's the framing that you used to set that? And I guess if I throw out some rough numbers, I'm not trying to get to 2026 guidance or anything, but if we say you get back to $400 million in EBITDA, similar to '24, 50% conversion of free cash flow, minus $175 million in CapEx, you're at $25 million in free cash flow. You're still not covering the reduced dividend. So I don't know if the assumption is how much cash you feel comfortable burning until things improve or if you have a different view around what earnings will be three, six months a year from now?

Yes, Josh, I think the Board kind of long discussion about the amount of the dividend cut, 65% from our perspective, gets us to about $60 million of cash requirements for next year for the dividend. That's down by about $115 million of cash frees that up. The $60 million, I think we're comfortable with that level.

When you look at how we've been generating free cash flow, we're $105 million on a year-to-date basis. We're closer to $200 million on an LCM basis. And we've been aggressive on working capital, quite frankly, whether that's on accounts payable, whether that's on inventory and we'll continue to do that as we progress through 2026, there's always opportunities to drive better cash flow. So I think that $60 million is a very reasonable level that our company feels that it can cover as you move forward.

Okay. I guess maybe a quick follow-up on the same lines then, though. If EBITDA improves, I guess, like I outlined with that, wouldn't there be an increase in working capital involved in that? Or do you think you can grow earnings and not have to invest in working capital, if there's more wood to chop there?

I think there's always opportunities in working capital, whether that's on the receivable side, quite frankly, and also some more on the accounts payable side. We've driven our supply chain financing program this year. We've agreed extended terms with suppliers. That's going to flow through into next year as well. But there's always opportunities on working capital, and we'll continue to be aggressive as a company. And I think we've demonstrated that through the first nine months of this year.

The next question is coming from Mike Sison of Wells Fargo.

So for MDI, the fourth quarter polyurethanes, the decline in EBITDA was a little bit more than I thought. Where do you think industry operating rates are going to sort of settle down in the fourth quarter? And then given the cost savings that you're generating for the segment, is there a lower operating rate you can get to, to kind of restore some of the earnings power for this segment?

Well, I -- again, there's not a whole lot of information as to where the industry is running. I would say that the industry -- it looks like it's -- the demand versus production, it's somewhere probably in the low 80s, and I'd say that's probably across all three regions. I'd say all three regions, the U.S., Europe and China. That doesn't mean that everybody is running at 80%. You've got some that are running full out. And somehow the notion that the more we sell, the more we make and others that are trying to calibrate more around demand and [indiscernible] vary company by company. So I wouldn't want to represent what competitors are doing when I say that the operating rates are in the low 80s. But I believe that's where we are as an industry.

You are going to see improvements in polyurethanes by the cost-saving initiatives. There's no doubt about it. But the singularly best thing that could happen to polyethylene is -- polyurethanes is to get prices up and demand needs to return. We simply are not going to cut our way back to normalized margins in this business without a fundamental change in the market. That could come from an improvement in the demand structure to come from consolidation in the market. They're still small uncompetitive facilities, I believe, that operate in this industry that typically would shut down when market conditions get to this point which may or may not happen.

And so as you look at what it's going to take to turn urethanes back to a more normalized basis, it's going to take more than just cost cutting. But that -- right now, that's what we can control, and that's where a large percentage of our time and focus is.

Got it. And then as a quick follow-up. A lot of companies has suggested they're not banking or even see much improvement in the environment next year. So it looks like you have a plus 80% or so in cost savings for 2026. Is there anything else that drives EBITDA upside in '26 versus '25 in an environment where demand could remain soft?

Sure. I mean in our performance products, we've got new capacities that we continue to introduce into the market on ultrapure cleaning solutions and so forth. We've got more capacity to produce catalysts and a mean -- higher end of means that have come on in this year that will be -- that are working right now with customers to be qualified and so forth, we'll see $5 million, $10 million sort of opportunities of improvement there are -- we have, I think, a very aggressive business turnaround that's taking place specifically in our home -- our spray foam business, insulation business, we'll see benefits from in '26. I would also -- we've also got some wins that we've had this year in contracts in the automotive segments and polyurethanes and Advanced materials, we will see a lot more of the output of those. Those are not cost-related. Those are new market applications and so forth.

So I would just say that in 2026, look, I can't think back at an error when I look back at 2021, all the way through all the up cycles from 1988 all the way through to 2021. the 5 or 6 major up cycles, nobody anticipated or saw the upswing 6, 9, 12 months before it actually happened. What may be the catalyst, what may be the consolidation, what may be the purpose for change? I wouldn't write 2026 off as being another bland year. There will be opportunities in it. And we might have to be a little more creative than we otherwise would be and looking as to where those opportunities and how they'll be created.

I just want to comment there might be incremental savings next year. We've articulated that at $40 million as we progress through the $100 million savings target.

The next question is coming from Jeff Zekauskas of JPMorgan.

Thanks very much. In the old days, you used to talk about polymeric MDI and monomeric MDI and MDI that was a little bit more specialized and there being a margin differential between the two. What happened to that margin differential between the two and why?

I think that when we look at the market 10 years ago -- 5, 10 years ago, I think it probably was more of a bifurcated categorization. If somebody was coming out of a system house if it was being formulated for a customer and so forth. I think that what we see today is more around, Jeff, a spectrum rather than an either/or. And I think that there still is a value-added component to our polyurethanes business. There's still applications that are very exciting in automotive and home construction and insulation applications where you'll have in the automotive sector, you have some of our most commoditized products. You also have some of our higher-end materials. And so I would just say that what we're seeing today, perhaps more so than in the past, it's not an either/or, it's kind of all of the above, and it's a spectrum rather than just a 2-sided belt.

Okay. I guess everybody looks at the data a little differently. But I would have thought that China imported into the United States, maybe 250,000 tons of MDI and that's pretty much gone to 0. And so -- and you talked about maybe 75,000 tons coming in from Europe. And whatever capacity may come on is later. So shouldn't conditions be ripe for the market to be a little bit tighter at the beginning of 2026?

Yes. I would say that if demand were picking up and if those were the factors going into it, Jeff, I definitely would agree with you. The simple fact of the matter is that people that are bringing on 150,000 tons in 2026, isn't that far into the future or out right now marketing that material, they're out -- with prices, and we're seeing [indiscernible] taken efforts to move that extra volume. So as I said earlier, it's not when the volume is produced, it's when you're out 6 to 12 months in advance trying to move that product. So there is a home when you finally are able to start up the facility.

Yes, the 75,000 tons coming in from Europe right now, just personally. Is it from [indiscernible] it doesn't bring anything in from Europe. That's kind of a surprise. I wouldn't have anticipated people doing that, but it's happening. And again, I think that we're probably underestimating a little bit how much was exported to Canada and Latin America and how much of that's been picked up by product that otherwise will be coming to the United States. It's just merely going a little bit further north or a little bit further south.

So yes, a lot of that is happening. And so I look at where we were kind of in the fourth and first quarter of 100,000 kilotons coming in from China. We're basically down to the third quarter was 10 kilotons coming from China. So we're definitely seeing a large drop off. But we're also seeing a pickup in other areas.

The next question is coming from Kevin McCarthy of Vertical Research Partners.

Peter, if I look at your Performance Products volumes, they've been running down close to double digits in recent quarters, but I think that, that is distorted by your plant closure in Germany. And so I guess my question would be, can you comment on kind of the underlying market demand as you see it for maleic and for amines and I guess related to that, if we take into account the new products that you talked about in Performance Products, do you see an opportunity to stabilize or even grow volumes in that business next year?

Yes. I think that we do. Maleic is a very important product for us in the U.S., and you're right. When you talk about the maleic volume, when you look at the net reduction that we saw in sales, maleic in Moers is about 50% of that reduction that we've seen. So a big chunk of that is Moers, and that needs to be factored in.

And part of that is also going to be the DJ going into ag. We've seen a little bit weaker ag this year, and we've seen some pretty competitive market conditions in a means all around an industry in construction and so forth. It just isn't growing that much. And so as we look at that going into 2026, again, our maleic anhydride were the -- I believe we're the low-cost producer and the largest producer in North America. We've got protective tariffs there of 50% to 60% depending on the whims of a certain President. And so that -- it feels like we've got some good protection there with a very good cost base and a very good manufacturing competitive base. So maleic is going to continue to be a strong market for us in North America, and we will be taking excess material to feed our European market. And as we look at that, we'd expect over the next year, that's probably going to be a gradual improvement. Our EAs, definitely [indiscernible] are going to continue to be, I think, flat to positive. And as we look at our -- the rest of our performance, I mean, that's probably going to be pretty flat.

And just to reiterate, Kevin, if you take Performance Products, you minus 10 and you take out the Moers closure, you're relatively flat year-on-year. That's the way to think about it.

The next question is coming from Hassan Ahmed of Alembic Global Advisors.

Look, a question around U.S. MDI volume, specifically for you guys. I mean, of course, 2025 continues to be -- has been and continues to be pretty -- sort of weak demand wise here, but leaving sort of broader macro demand aside, I mean it certainly was an abnormal year in terms of trade flows out of and into the U.S. for MDI. And you yourself talked about maybe losing some share, being a little more sort of holding on to pricing and the like. Then, of course, back in Q2, you guys talked about how typically sequentially in Q2, there tends to be an 8% to 10% volume uptick in MDI, right? And you guys only saw maybe like 3% or something. I'd like to think maybe that was one [indiscernible] are stuffing the channels.

So where I'm going with this question is, let's even assume the macro doesn't change that much in 2026, but trade patterns do normalize, how much of a volume increment in U.S. MDI would you see on the back of that?

Well, that's a good question. A lot of [indiscernible] going to depend on customer sentiment and pricing and where we can get the best value for our production. I'd remind you that in the third quarter, we were up 6% year-on-year and in North America in the U.S. markets and up 4% on the rest when you look at the entire division. So -- and I wouldn't say that, that's just one particular area. I think that, that was very strategic and surgical within areas where we can achieve the most value for our product. And so I think that we're very much going to have the same posture in 2026. I think we want to be smart with our volumes, but we will be aggressive in maintaining our volumes and getting prices through as quickly as possible.

Beyond that, Hassan, in 2026, I just -- I'll just get in trouble if I try to forecast the particular performance of the division.

That makes sense, Peter. And if I could sort of just talk about near-term U.S. pricing as well. Of course, you mentioned incremental capacity coming online in the U.S. market, which will be later in the year. But from the sounds of it, it seems trade normalizing, somewhat normalizing in the early part of next year. Antidumping duties, tariffs and the like, I mean, there is at least a potential for some pricing tailwinds in the U.S. and MDI. Is that correct?

Yes. Hassan, I think you're absolutely right. And we're in a little bit of the old joke that when the bear starts to chase us, I just have to outrun you, I don't have to outrun the bear. And so when I look at the polymeric MDI pricing today in the U.S., and again, I'm talking about polymer. This is the bottom end, most commoditized, you're seeing about a $200 a ton difference between U.S. and China. And you're seeing another $200 difference between China and Europe. Now that's not on an absolute basis, that is going to be on average basis. But you are seeing some stability, more stability in the U.S. than you're seeing in China and Europe. And so I would just say that, again, I'm not saying I'm happy with where the margins are in the U.S., but pricing in the U.S. is holding up better than the other two regions. And when you look at our manufacturing costs, the U.S. in China, about $100 a part a ton from each other, China being lower.

So yes, I think there's opportunity. What we need again more than anything else is just demand. And I don't think that we'll really start to see that picture until the end of February, early part of March, and we start to see the direction that proverbial construction demand and home building and seasonality, Chinese New Year's will be over by then. And what do we see on a global basis that starts to take place at that time.

The next question is coming from Salvator Tiano of Bank of America.

Yes. Thank you. we haven't been seeing much about the Spray Foam business for the past few quarters. So I want to get kind of an update on how are things going there? Is it a business that's EBITDA positive at this point? And when it comes both to that, to the spray foam business, but also insulation demand, have you seen any change from the -- I guess, in the summer when we replaced part of the IRA bill. I think there was one of the key credits that was canceled there. Has this affected the spray foam demand?

Yes. I don't think that we've seen any impact from the credit. We do with our spray foam business, it is a contributor to the business. It is up year-over-year, and we are the U.S. leader and we are -- we do have a share gain that has taken place there. And so as we look at the markets, the markets are down, but our business in the third quarter was up 7% from a year ago. And that's a business that you just don't necessarily go out and buy market share. You've got to have the service, you've got to have the quality, you've got to have the reliability, the consistency and so I think it's a series of factors, but we're seeing that business for us continues to gradually improve, and I give the management team there are some very high marks.

Great. And as a follow-up, I wanted to ask, in your prepared remarks, you mentioned about the need for restructuring, consolidation and you brought up actually. I think it was the phrase that you would work with your partners and with other industrial partners and manufacturers. So beyond Huntsman just taking on own actions like closing the Moers site. Could you actually -- do you see an opportunity? Or would you pursue consolidation through M&A for some businesses, for example?

I'm not sure about through M&A right now. I'm not sure I'd want to stretch the balance sheet on something like that. But I do see -- I mean if you look at the cost curve on a number of our products, it does vary quite dramatically in various parts of the world. In some cases, we are a market leader. In other cases, frankly, others are market leader. And we've got to be able to work and look at calibrating our volumes and calibrating our supply chains and that may mean that we're going to be looking to companies in the past that have been a competitor and see if where we can work together to try to get around some of the energy issues that are playing in certain parts of the world.

But I would just say that's a very broad offense that has been ongoing and continues to be ongoing, and I'm not going to get into particulars on divisions or products and so forth and so on. But there is opportunity and it does need to be followed through.

The next question is coming from David Begleiter of Deutsche Bank.

Peter, you mentioned that Chinese MDI imports into Europe have been pretty steady. Can you discuss the potential for a more robust tariffs and/or duties in Europe? I believe there's an EU litigation into MDI imports into the region. So that would be helpful.

Yes. I don't foresee the Europeans taking any real material action on that if it's anything like what they've done over the last couple of years. It's not going to happen in my lifetime. But it'd be great to see them do something, but I'm not counting on that happening.

Sorry to hear that, but so be it. [indiscernible] Any change in your view of long-term MDI growth rates as we exit this downturn?

Sure. I think that as we look at the biggest drivers around MDI, it continues to be a product that displaces other materials. When you look at the large volume side of it, it's going to continue to be construction and homebuilding and so forth, that's going to be the principal driver. But by and large, this is going to be a business that is going to grow equal to the rate of GDP plus usually about another 0.5% or about half of GDP in product replacement. So I'd say it's a business I would expect over the cycle to grow at about 1.5x the rate of GDP through -- via economic growth and also product substitution replacement.

The next question is coming from Arun Viswanathan of RBC Capital Markets.

If we look at the second half EBITDA in '25, it looks like the implied kind of midpoint is around $130 million. Maybe if you annualize that, you get to mid-200s. From there, is there a way you can kind of frame maybe the cost reductions, restocking or kind of downtime impact that you're seeing this year and maybe some other building blocks, if anything?

Yes, Arun, -- so you're right, if you take the midpoint of our guidance, which is [ 25 to 50 ] and you take the [ 94 ] and multiply that out, Savings, we've said from our savings program, incremental [ '26 over '25 ], about $40 million. And that's a program, as we say that we're comfortable or confident of achieving those target rates or exceeding them. Inventory hit this year through the first nine months through getting our inventories down is about $30 million impact on the company. You'll see some more of that impacting the company in the fourth quarter, as Peter has articulated performance products. So theoretically, if you just kept your inventory volumes at the same level next year as this year, then you will obviously get that back year-on-year from an improvement in EBITDA perspective.

Against that, we have had some noncash one-offs. We articulated those in performance products over the last two quarters of about $15 million Notwithstanding the macro, we talked about Advanced Materials. So there's a question earlier about the improvements that we continue to expect to see in aerospace as well as in power as you move through next year. And then obviously, it's around the macro and construction.

Great. And then just as a follow-up, is there anything else you need to do on the footprint. I mean, as you noted, we've gone through significant weakness here for a little while. So maybe is there any rationalization that you'd see that's required at this point? Or is it mainly just kind of waiting for demand to kind of get better?

Well, I mean, we're in the process right now of completing 7 site closures that we've recently had and some 600 people that we've either let go or move to lower cost positions such as in -- what we have operating in Poland or Costa Rica or Malaysia. So I -- we're always going to be looking as to where we can source our materials and if that can be done cheaper and more reliably, more profitably through another third party or consolidated to another site, we're going to -- we'll be looking at that continuously.

All I can say is, look, if we ever come in the office in the morning, and say, our work is done. There's nothing else we can do with the company here, we failed. So we'll continue to look at those things.

The next question is coming from Matthew Blair of TPH.

Great. The commentary on Aerospace for both Q3 and Q4 is a little bit better than what we were expecting. I think there was a comment that you have adhesive applications for aircraft interiors as a relative bright spot. So my question is, is your content per plane increasing? Or is this just a function of Huntsman capitalizing on overall rise in build rates in the industry?

So I think that over time, yes, we will be improving our content for playing. We're looking at kind of the traditional structural materials that go into the plane and we're more focused today, I would say, on the interior adhesions and the interior structures and so forth. So those are areas of growth for us. But just bear in mind, when it comes to Aerospace, our contracts are long term in nature. These are qualifications once you're done, they usually go for 10-plus years. And you've got -- these are the longest continuous contracts that we have anywhere in the company. So if we say build rate is going to be x and somebody else says it's going to be y. If it ends up being better than what we say, we will get the business. It's not -- don't -- I mean, look, if we see more production, if we see more deliveries that are taking place more applications, we will be the benefactors of that. And so it's a great end of the business, and it's one that we hope to continue to see the build rate improve and increase. And we will continue to increase our content on a per plane basis.

Sounds good. And then the fourth quarter polyurethanes guidance, does that reflect some benefits from cheaper benzene feedstock costs in the quarter? Or is there a lag that we should be thinking about?

There's a little bit of benefit, Matthew. I think the average for Q3 on benzene in the U.S. was [ 276 ] in the third quarter. It's trading today at about [ 250 ] million. it's a little bit of benefit in general as a lag as we move it through cost of production on interest cost of sales. So you've got a little bit of a benefit there.

The next question is coming from Laurence Alexander of Jefferies.

A couple of structural questions. How are you thinking about the potential impact for North America polyurethane demand from reshoring of appliance production? Have you seen enough announcements for that to be material? And if so, when? And then secondly, when you think about the new 5-year plan in China, or at least the first draft and the focus on shifting the chemical industry downstream, do you see that as a net positive or negative for Huntsman? And then I guess the third one, if I can just ask a third structural question is, given the outlook of probably several more years of volatility and kind of lack of clarity for the western chemical industry. Do you see a return at least on the corporate side of the fashion for conglomerates that we saw in the 60s and 70s kind of similar turbulent period.

Yes, an excellent question. I think on the first one on the appliances, we're not seeing anything material, and I don't think we'll see anything in '26 of materiality that will be coming in. Traditionally, those have been pretty low volume -- excuse me, low-margin applications. We have the expertise. We have the knowledge. We have the relationships if there's money to be made there, we'll be there. But I don't see that much business coming.

As far as China going down to the downstream business, look, I think there might be some opportunity for us in some of these areas. We're right now working with a lot of the Chinese producers. Well, I shouldn't say a lot, working with some Chinese producers as to how we can source material in China rather than exporting it into China is their quality improves and so forth. But just because you make the product, as we keep seeing it getting again just because you make the product and you even make it at a competitive price, doesn't mean that the product is qualified. So if somebody jumps into epoxy today, that doesn't mean that they're necessarily going to be getting Boeing's business or Airbus' business in aerospace next year or even in the next 5 years. So there is an issue around qualification. I would say, too, that as you look at what China describes is downstream in some cases, that means ethylene going to polyethylene, and that's a downstream derivative. I wouldn't read too much of it that it's a big rush into Specialty Chemicals. Specialty Chemicals requires as much of the qualifying and the demand from the customer as it does from the manufacturer. So just because you make it, again, doesn't necessarily mean that there's a home to it.

On the conglomerate front, that's something that we've talked about internally quite a bit. Just to see -- as we start to think about companies coming together to be able to look at their cost structure, their supply chains and so forth. It's a possibility that, that might see a resurgence to that, but it's yet to come to any conclusions on that.

The next question is coming from Frank Mitsch of Fermium Research.

And operator, sorry, we're at the top of the hour. So we'll take this as the last question. And Frank, I wouldn't cut you off even if we were 20 minutes past the top of the hour. So you go right ahead.

Peter, I sincerely appreciate that. I have a 4-part question. So listen, I'm looking at the maleic anhydride market in Europe. You shut down Moers, I believe, at the end of the second quarter. So it's been shut down for a while. Price is there are continuing to drift lower. Now one would have thought that your facility prices would stabilize and the market would balance. What is going on there?

What is going on there is you have a lot of Chinese material that's coming into the market. China about a decade ago, said that they were going to be making this new material. It's some sort of a biodegradable plastic that required maleic as one of the raw materials. I think it's a product called PBAT, P-B-A-T, and they were going to produce billions of pounds of this, so people could get shopping bags by the time they got home, the bag would disintegrate and the air would clean up and we'd all live in a better earth. So that never really materialized surprisingly but you have an enormous amount of excess capacity in China for maleic. A lot of that is finding a home in Europe. There's also, I would say, would be third party might even be from sanctioned countries and so forth that are finding its way through Russia -- or excuse me, through Turkey going into the European market. And so yes, Europe has a very porous import controls and very high cost structure. So it's a natural home for -- if you want to dump excess material, send it to Europe.

I think, again, when I look at the U.S. market where that is our bread and butter is our dominant market. Well, I'm not supposed to use the word "dominant". I think it's a very good market for us. And so we've got 50%, 60% tariff protection there. and we're a low-cost producer. We've got great raw material situations with butane and a great technology and a great management team in the U.S. And so we're going to -- we'll take advantage of Europe when the margins are such. But right now, it's -- you're right. It's a terrible market.

Much appreciated on that on the clarifications there. And just lastly, on your Slide 12, you talked about continuing to evaluate noncore assets. I assume that there's nothing imminent on the docket there, but I wanted to give you an opportunity to provide more color on what may happen there.

No, we're -- look, I don't think that there's anything really material that's happening. We continue to evaluate and look at various parts and pieces. And then until we get to a purchase and sale agreement on something, I wouldn't want to comment on it. But right now, we're mostly just looking at things around the edges, I would say.

Ladies and gentlemen, that brings us to the end of today's question-and-answer session. We would like to thank you for your participation and interest in Huntsman. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.