Earnings Call: Q3 2020

Oct 29, 2020

Greetings, and welcome to the Huntsman Corporation Third Quarter 2020 Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer It is now my pleasure to introduce your host, Ivan Marcus. Thank you, Mr. Marcus. You may begin. Thank you, Victor, and good morning, everyone. Welcome to Huntsman's third quarter 2020 earnings call. Joining us on the call today are Peter Huntsman, Chairman, President and CEO Sean Douglas, Executive Vice President, CFO and Tony Hankins, President of Polyurethanes. This morning, before the market opened, we released our earnings for the third quarter 2020 via press release and posted to our website, huntsman.com. We also posted a set of slides to our website, which we will use on the call this morning, while presenting our results. During this call, 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 SEC for more information regarding the factors that 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 on the website huntsman.com. Now turn the call over to Peter Huntsman, our Chairman, President and CEO. Thank you very much, Ivan. Good morning, everyone. Thank you for taking the time to join us. Let's turn to slide number 3. Adjusted EBITDA for our Polyurethanes division, the 3rd quarter was $156,000,000 versus $146,000,000 of a year ago. This is better than we had anticipated when we gave an update in early September as demand trends in nearly all of our polyurethane lines, including construction, automotive and elastomers came in better than expected. Margins also improved supply demand conditions throughout the quarter. These positive market trends and conditions have continued into October. The 3rd quarter improvement in adjusted EBITDA versus the prior year was driven primarily by the ongoing integration of our Ishenine Lupola acquisition, at lower fixed cost, which more than offset lower margins year over year. We also benefited from lower benzene costs. Our differentiated volumes grew 2% and our component of volumes declined 4% in the quarter compared to the prior year. Throughout the third quarter, variable margins in our differentiated business remained relatively stable. At the same time, variable margins in our components and polymeric systems improved off of the multi year lows that we experienced in the second quarter. The notable increase in component MDI prices over the past couple of months have been primarily driven by real global demand improvements as economies continue to recover from the 2nd quarter global COVID related lockdowns as well as from various fits in starts and temporary outages within the industry. Our China business, where we have less in downstream differentiation, and in other regions of the world has benefited most from the higher prices. Europe has also benefited, but to a lesser degree, Our higher downstream differentiated margins continue to show stability and importantly, we saw meaningful improvement demand in our higher margin elastomers business and within automotive. As is typical, there have been several planned turnarounds within the industry. And as the industry responded to improving demand trends, there have been various production disruptions. As we reported a few weeks ago, we have our own production issues in Geismar, Louisiana due to a third party supplier of industrial gas having a mechanical failure, which we estimate will impact us by approximately $15,000,000 in fourth quarter. As the various temporary production issues across the industry get resolved, we would expect that industry utilization rates will move back to a more balanced environment versus the seemingly temporary above average tightness that we are presently experiencing. However, we do see demand improving Auto is rebounding well and nearly all our other end markets are seeing positive trends subject to uncontrollable and unforeseen events, we would expect component margins to normalize at reasonable levels. We've shared before, we estimate that roughly half of our polyurethanes business is impacted by trends related to construction. With our largest direct exposure being within our insulation business, which makes up close to 40% of our global polyurethanes segment. Our portfolio is well positioned to benefit from the expected growth within the global insulation market, which is our single largest market, and we expect is our industry leading spray foam business, Huntsman Building Solutions, which continues to exceed our expectations with the delivery of meaningful synergies from We expect the $20,000,000 in identified synergies to be achieved ahead of schedule, and be largely completed by early 2021. Continued growth in North America will be supplanted by an aggressive effort to accelerate growth by scaling up this business internationally Just to give you some additional interesting facts about spray foam, an average home requires about £1500 of spray foam materials to insulate it. That currently sells for roughly $1.30 to $2 per pound, depending on the type of application utilized. Additionally, our polyurethane spray foam utilizes our eco friendly Huntsman produced polyole, which uses the equivalency of roughly 10 1000 PET bottles per average home otherwise destined for landfills. Foam is an economically compelling structurally sustainable and environmentally friendly alternative to traditional insulation products. We believe that our polyurethane spray foam will see strong growth for the foreseeable future provides an optimal solution in a world that is increasingly sensitive to green and sustainable solutions, where building standards are becoming more environmentally stringent. Today, we estimate that our polyurethane spray foam only represents about 18% of the North American insulation market and substantially less than that globally. The opportunities for above market growth in North America and globally seem promising. As we sit here today, looking into the fourth quarter, we believe the favorable trends of our global construction and automotive markets continue. We also expect to see continued $15,000,000 impact from our partial Geismar outage and some typical seasonality Putting all this together, we would expect that our 4th quarter polyurethane results to be in line with the 3rd quarter. Turning to Slide number 4, Our Advanced Materials business reported adjusted EBITDA of $25,000,000, down from $51,000,000 in last year's third quarter. The decline in adjusted EBITDA was primarily a result of revenues being down in Aerospace by 68% year over year. Expected to begin to start to recover until the supply chain fully destocks and adjust to expected much lower production build rate over the next couple Looking beyond the depressed Aerospace segment, there is a much better recovery story within our other Formulated Advanced Materials business. Our specialties businesses, excluding aerospace, improved throughout the third quarter with revenues down on 15% and EBITDA down 21%. This includes our Indian do it yourself DIY business. Which was heavily locked down during the first half of the quarter. Our sales into the power, electronics, transportation, industrial markets strengthen throughout the quarter as our EBITDA improved by 50% from the beginning to the end of the quarter. And this momentum has carried into October. The integration of our recent acquisition of CBC thermostats is on track and delivered a modest earnings call, the result of this acquisition are being negatively impacted by a needed inventory adjustment of about $5,000,000 in half of 2021 EBITDA related to this acquisition to be close to 2019 levels, despite approximately 15% of the business being exposed to the aerospace market. We remain confident that we will achieve $15,000,000 run rate synergies by the end of 2021 would expect to exceed this target as we move through 2022 and beyond as we anticipate 8 identifying additional cost savings and commercial opportunities. Looking toward the fourth quarter, we would expect our non aerospace Specialty Business's EBITDA to be close to the same levels as prior year and for CBC to make a modest contribution. However, on the back of continued weakness in our aerospace business and the sale of our Indian DIY adhesives business, we expect the Advanced Materials segment EBITDA to be slightly lower than third quarter. Just to be clear, on a pro form a basis, meaning if we were to include the DIY business in our estimate for the fourth quarter, our adjusted EBITDA for the Advanced Materials group would likely be modestly higher in the fourth quarter. Let's turn to Slide number 5. The Performance Products segments reported adjusted EBITDA of $36,000,000 compared to $38,000,000 in last year's 3rd quarter. The decline in EBITDA was largely due to approximately 19% lower volumes, partially offset by lower fixed costs. Our performance amines volumes, which make up about half of the Performance Products segment volumes, declined by approximately 6 in the approximately 11% of lower costs and a favorable product mix. Strength in performance amines comes as a result of specialty products used in composites going into the Chinese wind market, coatings and adhesives going into construction markets, and our low emission catalyst that provide VOC free solutions going into markets such as installation, bedding and automotive. Volumes and margins in our ethylene amines business continue to be weak due to the overall economic environment and competitive pressures. Overall margins in Malayic remain relatively stable and volumes that go into the construction related markets are now trending positively. Despite the fourth quarter being historically the weakest quarter of the year, we expect performance products adjusted EBITDA to be similar to Our textile effects division reported an adjusted EBITDA of $8,000,000 for the 3rd quarter, while volumes in the quarter fell approximately 13 dollars versus last year's third quarter, we did see a significant improvement in volumes and EBITDA versus the 2nd quarter. The volume recovery we are seeing is being led by our home textile products and our athleisure. Sportswear and protective apparel. We are also seeing a gradual pickup in demand within our automotive textile products. We are optimistic that the industry will continue to recover over the coming quarters, generally in line with the reopening of retail stores and pent up consumer demand. We believe that inventories in the supply chain are on the tight end. As our customers gain more confidence around the eventual recovery, we expect to see more benefits from restocking as well. Our offering of sustainable products in textiles continues to gain momentum, Just one specific by up to 50%. We are focused within textiles and throughout all of our portfolio of developing profitable sustainable solutions for our customers, while 4th quarter EBITDA and our textile division will be down versus the prior year, We expect that this business will continue to show further recovery and improvement versus the third quarter. Before sharing some concluding thoughts, I'd like to turn a few minutes over Sean Douglas, our Chief Financial Officer. Sean? Thank you, Peter. Turning now to Slide 7. We were pleased to see it better than anticipated recovery during the quarter. Just to give you a flavor of that recovery, we saw monthly adjusted EBITDA more than tripled from June to September. At a high level, our adjusted EBITDA is down $27,000,000 year over year As explained by Peter, this is largely attributed to the significantly depressed sales within our commercial aerospace business. And to still recovering demand for retail apparel year in all segments amidst the global recovery that has been underway. Though now improving, overall margins were a bit weaker year over year. More than offset by lower fixed costs largely as a result of our responses suppression to global COVID related impacts. Turning to Slide 8. We entered the quarter with approximately $2,500,000,000 of liquidity including approximately $1,200,000,000 of cash. In relation to the sale of our India based DIY business, we expect to receive $257,000,000 of cash within the next week. We also expect to complete the sale of approximately 42,500,000 shares of Venator near year end for approximately $100,000,000. This includes 5,000,000 shares at an agreed price of $2.15 per share. The transaction is subject to regulatory approvals, which $150,000,000 relating to the taxable capital gain on the sale of the chemicals intermediates and Surfactants business, that was completed earlier this year. Remaining cash taxes owed on this sale are approximately $185,000,000 to be paid in the fourth quarter of this year. Depending on the timing quarter may be reduced this year by approximately $150,000,000. If the transaction closes subsequent to year end, the $150,000,000 of cash tax savings will be received near the end of 2021 or the beginning of 2020 2. We are doing our best to close this transaction before this year end and are on schedule. We generated $189,000,000 of adjusted free cash flow during this quarter. This is more than we had anticipated for the quarter versus when we addressed you during our prior quarter's earnings call. In addition to our adjusted EBITDA More surprising was the increased cash provided by the change in working capital. Not only did we see a resulting larger drawdown of inventory, but also a bigger increase in payables than was expected. Our days inventory dropped by an additional approximate 5 days than was expected, with a similar increase in days payable than was anticipated. Furthermore, we were effective in managing our receivables through this COVID Canyon and DSO also reduced by a few days. As we shared with you last quarter, we levels are particularly tight. As we sit here today and look into the fourth quarter, we do not expect the typical seasonal release and primary working capital as typically we experience. In fact, depending on the nature of the ongoing recovery, we expect to see a modest build in inventories. For your awareness, we have a planned large scale turnaround scheduled at our Rotterdam MDI site for March, April of next year. 40 45 days. The estimated cash impact will be around $40,000,000 and the projected EBITDA impact should be under $10,000,000. We typically build inventory ahead of turnarounds. During the quarter, we spent $54,000,000 in capital expenditures. For 2020, we estimate that our total spend on capital expenditures will now be between approximately 250 and $255,000,000. This is approximately $25,000,000 more than we had previously guided. The increase is largely a result of moving forward for a total spend in 20.21 of approximately $55,000,000. With respect to the polyurethane splitter, we still estimate a total spend of approximately $175,000,000 or just over $180,000,000, including capitalized interest, and a startup in mid 2022. That leaves approximately $80,000,000 of spend on a splitter in 2021, and the remaining approximate $30,000,000 of spend in 2022. In other words, in total, we are still on budget and still on schedule. We are days away from renewing our primary insurance programs Worth flagging is that the global insurance markets are experiencing an atypical shortage of capacity. It's not only specific to Huntsman, but it will impact our annual insurance premiums by as much as approximately $15,000,000 all of which are paid in the fourth quarter. Putting this all together, we still anticipate a modest positive adjusted free cash flow for the year 2021. During the quarter, we did not repurchase any shares, but we did pay off a term loan of approximately $100,000,000. We have a U. S. Equivalent of approximately $520,000,000 of euro denominated notes maturing in April, April of next year and callable in January, which we currently expect to redeem next year with cash on hand. This will reduce our interest in 2021 by about $25,000,000. We remain focused on maintaining a strong investment grade balance sheet, being disciplined sensible and balanced in our capital allocation strategy and with the recovery underway generating consistent strong free cash flow. Peter, back to you. Thank you, Sean. Let's move into the final month of the year. I think it's worth looking back on some of our objectives and where we are our effort to create more shareholder value. Beginning in January, we sold our chemicals intermediate business for $2,000,000,000, This further transformed our balance sheet and allowed us greater flexibility to pursue aggressively our ability to grow the more strategic Teachic ends of our business. This transaction also allowed us to take advantage of tax losses that we are able to realize with the sale and hopefully before the end of the year. We do not see any major obstacles getting this completed by them. In May, We closed on the CBC Thermal SET Specialties business as we sought to further expand and diversify our Advanced Materials division. While we're disappointed to see the slowdown of our commercial aerospace business due to COVID-nineteen pandemic, the CBC acquisition will help fill the void created from this temporary loss in sales and EBITDA. As this valuable aerospace business begins to recover over the next year or 2, It will be additive to what we are building with the CBC acquisition and other ends of our Advanced Materials division. We are also well on track to deliver the previously announced $15,000,000 in synergies. In July, we announced our initiative to realign our cost and streamline our operations. At the time, we outlined $100,000,000 of savings from these efforts which includes acquisition synergies. We are now targeting approximately $112,000,000, and I would expect this number may well grow. We expect some $20,000,000 to be realized by end of this year and we should be running in excess of $100,000,000 by the end of next year. Last night, we announced the sale of our Indian based DIY business to Fiddelite in an all cash transaction valued at potentially $285,000,000. Value represents a multiple of 15 times our 2019 EBITDA. Huntsman will receive $157,000,000 in cash at closing, which is expected to take place chill to receive up to an additional $28,000,000 in cash within 18 months, depending upon achieving certain revenue milestones that approximate 2019 levels. We've built this business from nothing over these past 15 years and have taken this business about as far as we can without material nor investment. Piddellife is a respected adhesives business based in India and is well positioned to now take this business to the next level. This is a win win transaction that unlock significant value for Huntsman that we will redeploy in the near term to further reshape our Advanced Materials business. Clean the multiple of our sale at the beginning of the year of our intermediates business, Now, this India based DIY business is these 2 divestitures should demonstrate the quality of our businesses and divisions. We will continue to assess other assets in our portfolio, but given our balance sheet and global footprint, one should expect more acquisitions than divestitures. Lastly, I'd like to point out the performance of our newly formed Huntsman Building Solutions. This is an entity that we formed through the acquisition of Isanine Lepolek 2 polyurethane spray foam businesses that we further combined with our polyols and polymeric MDI production. In the past year, we have created the world's largest polyurethane spray foam business the world's best insulin and the 5th largest insulation company. We're committed we committed to you that we would realize $100,000,000 of EBITDA by the end of next year. I'm pleased to say that During the third quarter, we hit that run rate well ahead of our forecast. At the beginning of this COVID crisis, we told you that we would emerge from this mess, a stronger company, and when we entered it. At the present time, while I like the demand and margins going into the fourth quarter, We are also aware in keeping an eye on the rapidly changing market conditions, particularly in Europe, where the number of COVID cases and the national lockdowns have all increased in the past 2 weeks. The coming days, we will see the debt Dock market this past week, the effects of Hurricane Zetta, and the results of an election where a much loved Donald Trump will either prevail or lose against the much hated Donald Trump as America either approves or disapproves of his performance. Either way, this quarter is shaping up to be very interesting. One thing is certain, we will continue to focus on what we can control. We will continue to support our strong customer base Keep an investment grade balance sheet, control our costs and add value to our shareholders with smart out capital allocation, selective divestitures, and bolt on acquisitions. With that, operator, why don't we open the line up for Q and ladies and gentlemen, we will now have A confirmation Our first question comes from Bob Koort with Goldman Sachs. Thanks. Good morning. Good morning, Bob. Peter, maybe to ask Tony a question. I think you mentioned he was on the line there. There's certainly been some volatility in production curtailments as you mentioned in MDI, but I also sense talking to investors a lot of varying consultants opinions on how much MDI is coming into the world over the next couple of years. I was wondering if we could talk maybe specifically, Tony, what your business intelligence is telling you about supply capacity coming into the MDI market in 2021. And to the extent we have a normal world, what do you think the demand growth would be in 2021? Bob, good morning. Good to be with you. I see the market to be very balanced right now and over the next 2 years, there are no major new capacities coming into the market, some debottlenecking. But overall, I think that demand growth and supply growth will be matched and very balanced. And as we exit quarter 3, we're seeing round about within our business anyway, a 3% to 4% MDI growth over last year. The recovery across all sectors has been really impressive through quarter 3, particularly in our insulation business. And I see that continuing. I mean, unforeseen circumstances with COVID and what that may do in quarter 4, but right now, we're not seeing it. We have strong order patterns. And I think as people are aware, there's a lot of maintenance going on right now, and I would estimate it. Across the global business, right about 20% of MDI capacity is currently idle with maintenance. But coming back to your question, Bob, I see the situation to be very balanced and I don't expect the supply to exceed demand over the next 18 months to 2 years. Great, thanks. And Peter, if I could ask, sort of broadly through the portfolio, you mentioned MDI and it's per insulating properties. But as we start to think about green energy and new deals and stimulus for those sorts of things. It would seem you've got wind, you've got insulation, you've got construction, insulation, residential insulation. How can you guys tap that theme that's continuing to grow in significance in terms of energy conservation or new energy? Thanks. Well, Bob, I think that as we look at the entire Green New Deal, There's a lot of it that I have some, some consternation about, to be honest with you, but there's also a lot of it that when we look at particularly around construction and what we see in insulation and OSB And as we continue to make progress in various grades, they're going to see you're going to see in the coming year. So, fire retardancy and so forth coming into a lot of these get better properties. We're environmentally coming up with a number of opportunities here. And, I think particularly around energy conservation. If you look at our means business, what we're doing to take sulfur and a lot of the bad actors out of gas treating. If you look at our polyurethane catalysts and other products that take volatile organic compounds out of a lot of the chemistries of today. We look at the water conservation and color conservation. The chemical industry needs to be, my opinion, enhancement in particular. I think we need to be more bold in what we're able to do. As providing solutions and transitioning an economy to be more green and to be cleaner and more profitable all at the same time. So, believe me, I think regardless of who wins, we have internal ideas and strategies and have already met with lobbyists on both sides of the aisle, where we'd like to be part of a solution going forward, not waiting for inauguration day, but it ought to be, I hope that our influence will be felt, right after the election. Because I think that we bring a number of solutions, to the table. Thank you. Our next question comes from Frank Mitsch with Fermium Research. Yes. Yes, good morning. And for what it's worth, my vote would be for a much loved, Ivan Marcuse, versus the counter there. A couple of years ago, you guys did a really good job of, detailing the windfalls from some of the outages on the MDI front and how that impacted polyurethanes. Is there a way that, is there a way that you could kind of quantify what impact it if, if at all that showed up in the third quarter? It's specifically around around what of the under utilization of production of MDI? Well, I mean, obviously, we saw some, you had, some, some demand constraints, but, a lot of competitors had downtime, we saw a bunch of force majeures announced. And, as you indicated in early, September, you thought you would do $40,000,000 higher of EBITDA in polyurethanes and it came in a little bit higher than that. I would assume that some of that was related to the force majeures. Was it not? Yes, I think that as we look at it, I mean, as I tried to articulate in some of my comments, I think we're going to see this most profoundly in China where we have more commoditized production, versus North American where we have more formulaic production. And And then we look at taking a lot of our commoditized production of the polymeric and moving it downstream into the insulation business. I mean, ideally, We'd like to be moving as much of the product that is most impacted by these sort of shortages. We'd like to be moving that product further downstream into spray foam and others. But I think that as we try to put a handle around an economic handle, if you will, I'd don't like using the word spike, because that would denote that we're going to be up X dollars 1 quarter and down X dollars on another quarter. But I think that the overall impact of this would probably of these shortages and pricing. I think probably somewhere around $20,000,000 to, on a quarterly basis. And as we look at that going into the fourth quarter, we'll probably see the full realization. I think it probably ramped up in the third quarter of that amount. We were at the beginning of the quarter. I'm not sure you would have seen a whole lot of that. By the fourth quarter, you probably ought to see that, in full effect of around $20,000,000. But again, I that's a really it's a really tough thing to calculate because as you get shortages on a global basis, bear in mind that you're looking anywhere from 30 to 60 days to be able to take MDI from point A in Asia or point B in Europe or the U. S. And move it to other areas of the world. So, people somehow think that you can instantaneously move product globally. That's just really tough to do. And how much of this is a spike in margins and pricing and so forth? How much of it is due to a recovery of demand? How much of it is is due to outages and so forth. At the end of the day, it's tough to tell. Yes, fair enough. Fair enough. And then if I could, kind of interesting after the first quarter conference call, I think some of the discussion was around how the pandemic might impact M and A and move it to the side. And obviously, you guys have done a heck of a job remaking the portfolio or making some changes here there, via M and A, since that timeframe, And so with the announcement of the sale in India, I think you indicated when talking about Advanced Materials, that you're looking to redeploy that money into M and A in that front. When, what sort of time frame? What sort of size are you looking at? Any sort of color you could provide there would be great. Well, we're in the process right now of actively reviewing a number of opportunities. And, as we look at this, we want something that's going to have synergies, hopefully, some product pull through, some synergies around that. Something that will be additive to our technology and something that we can globalize. And as we as we kind of look at that matrix we're looking actively right now at multiple options. And, I would say that again, I stressed in my comments that we'd like to keep an investment grade balance sheet. And we certainly don't want to stress those statistics. So I mean, it's a bit too early for us to name, potential candidates here, but I think we also mentioned that this acquisition would likely be in the Advanced Materials segment as well. So that's something we can look forward to kind of the early part, earlier part of 'twenty one, you think? I would hope the sooner the better, but the way that, transactions go, it's just they've kind of have a life of their own. Our next question comes from Mike Sison with Wells Fargo. Please proceed with your question. Hey guys, nice quarter. Peter, when you think about the insulation business, and there are folks who think that housing will remain pretty strong for the next couple of years given I think there's a trend maybe moving in the suburbs. Do you think this is a business that grows double digits high single digits? So what's the cadence of growth as we head into 2021? I think that you're going to see high single digits, but as you look at this, I keep a couple of things in mind. First of all, we look at spray foam in general, and that's about 18% of the North American insulation market. And that's for the entire spray foam that's not just Huntsman. I may have mispoke in my comments here leaving a word out. That's entire industry supplying, and not just Huntsman. But as we look at that spray foam opportunity here, if you were to look at probably one of the easiest ways we talk about the greening economy. If you're looking at one of the easiest ways to conserve CO2, just under 50% of all energy consumed, globally. It's consumed to adjust the environment of our homes and offices and, insulation is one of the easiest ways to do that. The studies that we've done internally with our own customer base of people in spray foam, you're looking at heating bills that are, that are cut in half with people that take that cheap pink garbage out of their attics and they put in our high quality spray foam. And so That's not a sales plug, by the way. And so as we look at it, there's really through very little effort. You can have a real impact on the environment. If building standards were to just marginally change or much of what you see in Europe or even in many of the states in the U. S. And you were to see a build rate of a million homes, which is down significantly from where we today. I mean, I'm kind of taking a worst case scenario of 1,000,000 homes annually. And we would have a 20% penetration something like that. You would see, you would see this business in very short order in the next couple of years doubling. But I think on a realistic, I mean, so we just kind of look at present market changes without any changes in legislation or anything else. This business, we think, will continue to grow in very high single digit, sort of numbers. And that's on a global basis. Got it. Thanks. And then I guess a quick one for Tony. I think you said 20% of global capacity is out. How long do you think it'll take to get some of that pass you back online? And then when you look at what pricing is now relative to last year or sequentially, it's up quite a bit Can you maybe talk about how the timing flows? I know you mentioned Peter $20,000,000 maybe this quarter, but will you see more of that effect in the first quarter versus this quarter? Hi, Mike, just coming back to your question with 20%. So personally, it's hard to tell because it's these plants around the world and our competitors clearly have a better view than I do on this. But I think that some of that's going to come back in quarter 4. Our Geismar plant is scheduled to come back online on November 15th. And the plans when they come back, it takes some time to get them back to full operating rates. So I think we're assuming that most of that outage is going to continue through quarter 4 and then we'll slowly start to work us back way back into the marketing quarter 1 of next year. But our history has shown that these plans take longer to come back than people forecast. It is a complicated process to get MDI plant back on stream and it always seems to take longer than we expect. So I think you should assume for the next 3 to 6 months that capacity is slowly going to work its way back into the market. And I would just like to clarify that when we talk about that $20,000,000, that is a 4th quarter number. And that's assuming that the pricing that we're seeing today holds out through the quarter. And, I would say that when you look at how much of that was in the third quarter, it would have been felt very, very little in the final part of the third quarter. Thank you. Our next question comes from John Roberts with UBS. Thank you. Peter, do you have any thoughts on how quickly performance products in the non aerospace part of epoxies can get back to pre COVID levels? Yes. I think that as we look at it, I think by the early part of next year, I think that if present trends continue. And again, I want to emphasize that if you were asking me that question 10 days ago versus today, down versus post European lockdown. There's just a lot of noise and static in fourth quarter, and I'm generally a pretty optimistic person. So I mean, take that for what it's worth. But as we look at the non aerospace segment of Advanced Materials, I think that you're we're somewhere around the 90% of where we were, today. We're somewhere about 90% of where we were a year ago. And I would expect that to be back on year over year non COVID sort of volumes by the early part of next year. Again, me that we continue recovery, not that we fall back down. The aerospace segment of that, just again, looking at the what's been said by Boeing and by others. I think that you're simply looking I'm looking at kind of a 2 phased approach One is how long does it take us to get back to a normal a post COVID normalized build rate that makes any sense. Because right now, I think that Boeing essentially is going to have to stop production and just clear the inventory of planes that are sitting around Victor'sville and all over the place waiting for customers to take those. Once the existing inventory of planes clear out, then you go to what I would call that, that new normal, which is a greatly reduced production rate. And then probably a couple of years down the road. You kind of get back to a post or a pre COVID sort of a level of flying again. And what that world looks like and which planes are actually put back into, into the fleet and so forth. Time will tell. But the non aero business of Advanced Materials continues to do well, continues to grow well. I think we'll have a lot of applications as we look to that excess capacity going elsewhere. And then could you just remind us what percent of the polyurethane segment sales are component in polymeric NDI that's not protected by spread margin contracts? In the U. S, and again, those spread contracts are only about that's virtually all that's in North America. And it's about 60% of that is of the polymeric and is under contract. Again, that's in the U. S. I yes, that we haven't really that really hasn't caught on in other parts of the world. Our next question comes from Alex Yefremov with KeyBanc. Please proceed with your question. Yes, good morning, everyone. Peter, your current domestic spray foam business, I think you're saying about $100,000,000 normalized EBITDA run rate. How should we think about the international opportunity? Can you give us some idea on how soon you can get there, maybe some targets for next year or next 2, 3 years? So I think that over the next couple of years, I think we're really focused in over the next 12 months. So as you look at the EBITDA of that business, I would say that, that, I think there's a real opportunity today about 10% to 12% of that EBITDA is coming from international markets. And it'd be great if we could see that go up to a quarter. You know, it's an enormous opportunity for us. And when we look at the penetration of polyurethane spray foaming, in Europe and in Asia. We already have the infrastructure there. We have the blending capabilities. We have the people there. We have the distribution networks throughout Russia and China and Europe and Southeast Asia. So I would hope that over time, we're going to continue to see that strong single digit, pushing 10% sort of growth on an annualized basis in North America. And we hopefully, we ought to see, better than that, internationally once we're up and operational. But we're starting at a very low basis there, but it still is is EBITDA positive even today. Thank you. And a question for you, Peter, or for Tani, So some of the trader ags are reporting strong demand for rigid insulation panels in Europe. Is this a normal cyclical recovery after lockdowns, or is this, also a result maybe the secular impact from some of the EU policies? Well, I think there's going to be the green deal that we're seeing in Europe. Greatly is a great incentivized incentive for builders to an architects in construction firms to be implementing the best practices in the best installations and the best energy conservation And it would be natural that they would be, moving to polyurethane. So when we look at that rigid foam section, I don't think it's just Huntsman, but other companies are seeing a healthy demand, particularly given where the macro economies are in these countries. Alex, I think just to add to what Peter said, we're also seeing continued strong demand for DIY, particularly in Europe and North America. So a lot of that insulation, particularly in the composite wood products business continues to see very strong growth in both Europe and America. And I think that is a result of the continuing pandemic and people continuing to use discretionary spend on improving their homes, which is benefiting our business very significant Thank you Our next question comes from Hassan Ahmed with Alembic Global. Peter, a question around the polyurethane business. Some of the trade publications have been talking about fairly tight conditions on the polyole side of things. And how with rising prices and polyols, cost availability, there has been reduced sort of demand for TDI. Now the question really is that as sort of I heard your comments, obviously MDI demand seems to be quite strong. So my question really is that have you guys been gaining from TDI? I don't really think so. I mean, a lot of the applications of the TDI goes into don't necessarily, compete with us head to head. I mean, there's that fringe area around soft foams going into furniture and so forth. But I think it's a pretty small segment. We really don't have a marketing effort that would say we're going to target TDI or TDI applications. Again, there is overlap, Hassan, you're absolutely right, but it's not something that's a major effort for us. As we look at polyols, I think we're finding ways relocating and replace our polyols We particularly like the polyester polyols. I mean, to the extent that we can build that end of our MDI and our polyurethanes business into the polyester, polyol, our taro business, where we're using that technology recycled bottles and, and, moving that ahead. I think for us, that's going to be something that will be a high priority for us. Very helpful, Peter. And as a follow-up, going back to the sale of the Indian DIY business, obviously you guys got rate multiple. If I run the numbers, obviously, you're looking to replace the sort of $19,000,000, $20,000,000 EBITDA that you guys generated from that business in 2019, according to the press release, you guys said rather quickly, you want to replace that. So I mean, is it fair to assume that that $19,000,000, $20,000,000 of lost EBITDA in any business that you acquire, it would be at, I'm assuming a multiple significantly lower than your sale multiple. So a two part question. Is that fair to assume? And second is, how quickly will you be able to replace that? Well, I think that it's a I think it's obvious what I said earlier, Tom, that we're when I say we're actively reviewing opportunities, that we were in negotiations with, off options that we think will be, will be an opportunity to expand particularly advanced materials And I don't want to get into, where that multiple might be and so forth. It's just right now, I think it's a bit of a sensitive time to be talking about potential acquisitions. Hizon, I would just say whatever the acquisition is, we've always said that post synergies that those multiples would be very close to where we trade or better. So when you look at it on a post synergy basis, certainly, it's going to be a lot better. Thank you. Our next question comes from Jeff Zekauskas with JP Morgan. Please proceed with your question. Thanks very much. Your EBITDA in polyurethanes was above where it was last year and volumes were or flat. And what you said is the markets are a little bit tighter than they might be ordinarily, but your volumes should grow. So order of magnitude, should the polyurethane segment earn in 2021, what it did in 2019? Just roughly? Yeah, I would hope that it would be, that it would be close to that. As we look at that, probably, let's say, I'm just looking at 20 you're asking a 2019 number versus a 2020 number. 2021? Right. In other words, 2021 should look like 2019 given that the third quarter is a little bit better, a little bit tighter. It's going to loosen up your volume going to grow? Yes. And I think that as we look at the volumes and so forth, we ought to, especially if you factor in the HBS, Huntsman Building Solutions, we ought to be doing better in 2021 than we did in 2019. Okay. And what would it take to get the textile effect business back to normal? People going to stores and buying clothes. Yes. And yes, so I think again, there you will see, as I kind of look at the the recovery of demand and textile effects, we were down 60%, 70%. It's the lowest point year on year demand. And then and now I look in the fourth quarter, we're down single digits from where we were a year ago. Granted a year ago and I compare this year's fourth quarter to last year's fourth quarter. Textiles effects was feeling more of the impact of COVID than the other divisions because it's so Asian Centric. And of course, being that the virus started in China, and in that area, the world was impacted before any place else. So, as we look on year on year comparisons, So we'll probably see that exceeding last year 1st in textile effects. As we look at textile effects, we'll see a rather rapid recovery to a point. And then that last point will come about gradually slowly, I think, through the early part of 2021, as stores and retailers start opening. We clearly have seen that there are certain close, that in apparel and textiles that people will buy online. People typically buy their athletic wear and so forth online. People typically don't buy formal clothes and things that need to be fitted, things that need to be tailored, things that people want to try on and so forth. People typically don't buy that online. And so there are certain segments that are doing well. Other segments that are, that are not doing very well. And that will, I think, recover is, as you kind of mentioned, recover is the retail outlets start opening. Auto is gradually recovering. Hometech Styles is recovering. And these are recovering a lot faster than the retail end as well. And anything dealing, of course, with PPE, the personal protective equipment and everything, we're seeing a growth in that area as well. Thank you. Our next question comes from David Begleiter with Deutsche Bank. Thank you. Peter, you mentioned talking about the India adhesives sale that you might be looking into assess other assets. I assume they're pretty small, but any more color on what those could be and the size of those other assets that could be reviewed? No, I again, I when we talked about divestitures or acquisitions, I never want to use the word never or say that there's parameters about what we may or may not do. I'm quite pleased with the portfolio and the shape of the overall portfolio. But at the same time, part of our job that we have is to look at our assets, to assess our assets. And as I look specifically, the DIY business in India, I think that we, that we took an asset from nothing. We built it. And for us to continue to build it at that rate, we would have had to have started consolidating market share, putting in quite a bit of investment in capital and retail advertising and so forth. And the company that we sold it to Piddellide is already in that segment doing all those things. They put a higher value on it than we did internally. The extent that we have other products and lines in the business, that would fall under that same sort of of a parameter. I think we owe it to our shareholders to, to look at where we can create the most value. But I think that generally, I don't see a lot of pieces for sale within the company. And I look at the size of the acquisitions, look at what we've done over the last couple of years, between the icing, the consolidation of our Malay iDried CBC, Demilec. I think these are pretty good sized acquisitions that are meaningful You're not risking your balance sheet, you're not stressing your balance sheet, but we see meaningful synergies and meaningful opportunities to globalize and to build these businesses. And just in your cost savings, I think you increased the target from $100,000,000 to $112,000,000 modest increase, but where did that $12,000,000 come from? I think you're looking at 100 of 1000 of dollars here and there. And you're looking at opportunities, I think. It's not all coming from one specific segment. And I think each segment as they start looking within their area of opportunities for consolidation and rationalization and streamlining businesses and so forth. Their finding opportunities is you start taking through these sort of projects. Thank you. Thank you. Our next question comes from PJ Juvekar with Citi. Please proceed with your question. Yes, hi. Thank you. Peter, can you talk about Performance Products Business? You had 19% volume declines or sales declines, I should say, in this quarter and 20% decline in 2nd quarter So you're not seeing what sequential pickup. But despite that, your EBITDA margins have been very resilient. EBITDA really is not down that much. So can you just address the top line versus the bottom line in performance products? Yes. Our big volume in that Performance Products is our Malake and hydrides. And, I would just note that our biggest single facility that's that almost exceeds the rest of the capacities combined globally within Huntsman is our Pensacola, Florida site. And that that site was down, for hurricanes that passed through the area and some of the residual impact of those hurricanes. So I think 3rd quarter, we had some one offs on volume and on availability of product. Certainly, the demand for the product grew throughout the quarter. Malay can hydride is used a lot in yeah, if you were to go into the think of the bathroom fixtures and apartment fixtures that you would see, the kitchen fixtures that you would see in an apartment or a hotel. And so we're seeing very anything that has to do with residential construction and insulation or OSB or TexOzzo is doing quite well. Anything that has to do with, with closed in small unit, apartment construction, hotel construction, has been has been recovering at a much slower rate than the residential. I think the Malayic construction applications I don't want to say that they're all tilted towards that apartment and hotel sort of, of construction, but they are tilted a bit in that And so you're going to see, I think you're going to see a slower, construction recovery in Malayic, but you'll see it nonetheless. So I think you'll see that recovery coming. And I think the impact of the ensure excuse me, the hurricane impact on production, limited the number of pounds that we had to sell. And can, you know, the EBITDA, can you address that it's been quite resilient. What accounts for that? I think that those are strong products I think we have unique businesses and applications. Margins are stable. And these are great businesses. And then just quickly, you earlier mentioned about your green pu spray foam that will include PET bottles? And how do you charge a product like that? Do you get some kind of a green premium or is it kind of priced in line with the existing product? Thank you. Well, I think over time, is you start seeing, the quality of the product that we have and the base, how it's made and the greening effect. I don't think that we're getting a green premium today. I do though think that all things being equal, and you've got an opportunity to use some things that is made. They'll be in your house for decades to come, that's made from recycled PET you look at the environmental advantages that come from all this, I think that there is a premium. And I think that over the course of the next year. So as we start more aggressive advertising and more aggressive promotion and so forth in this area. Again, I want to remind you that this is a business that 2 years ago, we weren't even in this business. So we view this business really as it's still to some degree as excited as we are about it. We're still rather in the infancy of the business. And I think consumer habits and consumer sentiment is going to be very high and they're going to care about this stuff. So, yeah, I hope that over time, we would be able to have a green premium. Thank you. Our next question comes from Kevin McCarthy with Vertical Research Partners. Good morning. Thanks for squeezing me in. I wanted to ask about your equity earnings, which came roaring back sequentially to $21,000,000 in the quarter versus a quarterly run rate of about $2,000,000 in the first half. I'm cognizant you have a JV with Sinopec in China that makes propylene oxide and other products. Was that a meaningful contributor And if so, what are your thoughts on sustainability of the third quarter level as you look into the 4th quarter level and beyond, you know, POC seems really tight these days, in some parts of the world. Well, I think that we did see an impact in the third quarter, from the, from a joint venture we have in China for the POM TBE facility that we have signal pack and, and I think that as we look at this on a normalized, a more normalized basis, I think that number will probably be around $40,000,000. I'd count on about $10,000,000 a quarter, on average on something like that. And yes, I'm not sure we mentioned or not, but in the fourth quarter, I think we do have a T and I, at that facility. So I wouldn't certainly wouldn't be looking for a repeat in the fourth quarter what we saw in the 3rd quarter. I see. That's helpful. And then, Peter, just coming back to the subject of capital deployment, you've obviously got a lot more financial flexibility, pro form a for the deal that you announced yesterday as well as the Venator transaction. It seems as though, acquisitions are plan A, but in a scenario where we started to see more prevalent lockdowns a more difficult winter, if you will, resulting in equity market volatility. How would you characterize opportunity for repurchases, income and quarters? Repurchases of stock. Shares? Of Huntsman shares. Yes. Yes. Look, again, I never want to say never. But I think that as we look at the balance sheet and as we look at our priorities of a dividend of M and A and then organic investment and organic growth internally. We look at the IRR on what we're able to get today. I'm not sure that I think it'd be quite a while till we were buying in any more shares. I don't foresee that in the foreseeable future. But again, if something were to radically change, it's something we obviously ought to be considering, but I in the present scenario, it'd be tough to see that. Understood. Okay. Thank you so much. Thank you. Operator, why don't we take one more question? I think we've kind of gone over our time limit here, but we'll take one more Thank you. Our final question comes from Lawrence Alexander with Jefferies. Good morning. And just a quick one then, how much of your businesses run on market facing dynamics similar to the business product, the building products business you highlighted? And how do you think about the pros and cons of structuring the company on a end market basis as opposed to a product line basis? Lawrence, I apologize that I don't have a precise and clear answer. I've always been a bit of a believer that you've got to control your supply chain. So you've got to control the costs in the supply chain. We've looked internally multiple times of looking at having, an aerospace division, automotive division, a construction division, have all of our products flown to that one division. I don't know, and there are a lot of competitors at Seamil every 2 or 3 years, they kind of pendulum back and forth. I think that those opportunities, particularly as we look at construction and auto, which is 60% plus of our overall business. We try to capitalize on relationships and and applications and so forth. But if you've got an application that's going into a coatings application on a car, a product going into the seat on a car. Quite frankly, most car manufacturers don't tie the 2 together. And they're not going to pay you any more or treat you any better because you've got you're supplying with paint and you're supplying with foam and you're supplying with wiring cable. And so it's I think you lose some of that efficiency of just looking at the supply chain, looking at your working capital, looking at your technology, I believe something like polyurethane, some of it like Tony's transfixed and keeping an eye on benzene down through nitrobenzene, aniline, MDI the formulations, systems and so forth, keeping an eye on that entire line rather than, being muddled into what we're doing in an end market. But you really have to, in my opinion, walk into gum at the same time. You've got to be able to look for those opportunities. But I just don't think that they're as prevalent as they, as they usually are. Building materials might be Mike, we'll continue to experiment with that as we look at what we're doing with spray foam and how that might overlap with with some of the applications in OSB and how that might overlap with some of the rigid foam. We're already in all three of those. We're market leaders in all three of those. To the extent that we can find consolidation and opportunity, we'll certainly be doing it. But again, you look at the customer base regionally, you look at it, it just varies from company to company and contractor to contractor and state to state, to be honest with you. So I think we'd rather be focused on kind of a very targeted approach rather than a macro approach. Thank you. Sorry, that was a real long winded answer, but Well, it's probably from asking a second question, so that's perfect. Okay. I was victorious then. Okay. Well, thank you very much, Lawrence. Good to hear from you. Thanks a lot for clarifying the call. I know we didn't get to all of you. So feel free to give me a follow-up call afterwards and, thanks for joining us. Ladies and gentlemen, this concludes today's web conference. You may now disconnect your lines at this time. Thank you.