If you've been connected to the plastics industry in any way in the past 30 years, chances are you've dealt with Jon Huntsman Sr. In that time, the 61-year-old leader of Huntsman Corp. has transformed his Salt Lake City-based business from a plastic foam packaging producer to one of North America's largest polystyrene makers and again into a $4 billion-a-year power in the specialty chemicals and plastics packaging markets. But Huntsman may be best known for his ability to profit from shrewd purchases of companies and businesses that are at the bottom of industry cycles. Along the way, he's fathered nine children (and 39 grandchildren), served stints in the U.S. Navy and the Nixon administration and donated $100 million to launch the Huntsman Cancer Institute at the University of Utah. All in all, not bad for a teacher's son who made it through high school with two shirts to his name.
It was very clear in the mid '60s that products made of wood, glass, metal and paper inevitably would be replaced with much more durable, less expensive and more flexible materials that were petrochemical-based. In 1970 — after I had worked in the industry for about 10 years for other companies, including the Dow Chemical Co. — we had the chance to establish our own company, and I felt impressed to continue in the plastics business.
The '60s were the embryonic years of plastic packaging and the formation of many plastic products. We were required to help engineer our own molding machines or vacuum forming units. We had to piece together many of our own extruders in those days. We didn't have knowledgeable companies that could provide ready-made equipment.
It took several years for us to put together some of the first printers for plastic products. These original printers were utilized to color imprint our first egg cartons, takeout containers and Big Mac containers for McDonald's. We had a very difficult time developing hinges, locks and closures. No prototypes were available on the market.
There was a dramatic shift once again for us, beginning in the early '80s, when we shifted our emphasis from being a fabricator of products to being a manufacturer of raw materials [resins]. We made a dramatic shift directly into the petrochemicals field, with primary emphasis on polystyrene and styrene monomer production. Later in the 1980s and early 1990s, we integrated downstream into intermediate petrochemicals products when we purchased our ethylene/propylene crackers.
The banks often questioned me and suggested we were expanding too fast. If we went with conventional wisdom, we never would have had a company today. We've done what was necessary and essential to build and diversify. For years, it was very much a one-man business.
We had the good fortune to have entered the industry in its early stages and, at that time, there weren't substantial barriers to entry, as there are today. Due to our shortage of capital, we would tend to wait for the low end of cycles to do our principal buying and acquisitions and then permit the upward cycle to allow us to repay debt and to prepare financially for the down years. We've been able to manage the cycles well. We also have been very lucky.
I don't think today we could replicate what we did 15-20 years ago. To compete in petrochemicals, a $300 million to $400 million investment is minimal. However, in plastics, there are opportunities for upstarts and innovative, creative people, because the barriers to entry are far less onerous. There are still opportunities, but they're more limited today than they were in the '60s and '70s.
We've exited polystyrene for the most part. We still, however, produce expandable polystyrene in North America and Australia. We're proud to be a shareholder in Nova Corp. They are a fine organization. Huntsman Corp. can be more of an opportunistic business today in the context that we haven't developed a strategy that restricts our entry into any commodity or specialty chemicals business. Today our focus is basically — since we've been in all phases of the business — focused on return on equity. We try and determine how our businesses can do well so we can maximize our contributions to the Huntsman Cancer Institute and to the humanitarian and charitable causes we believe in so deeply.
Our sales are somewhere in the $4 billion range today. We hope to experience considerable growth in the next several years. We'll look to purchase some businesses that public companies will like to shed because of their cyclicality. We're very focused on major acquisitions and expansion in 1999 and 2000.
We have no interest in a public offering. It would be difficult for our family, because virtually all of the financial profit that doesn't go back into repaying debt and capital expenditures to improve our facilities is directed to the Huntsman Cancer Institute or to building homes for the homeless, or feeding the poor, or building a center for abused women and children, or to university scholarships. Public companies can't do that because they have to direct profits to shareholders for dividends.
We're not tempted to go public. Our six sons and three sons-in-law, who are all in the business, together with a professional and capable management team, are leading us into the next generation.
I anticipate Huntsman Corp. will continue as a major player in the chemical and plastics businesses in future years.
If there's one basic challenge for 2000 and forward, it's consolidation of our industry to lower our costs and create efficiencies. The public at large has an inadequate education in both the plastics and chemicals industries. Therefore, someone can be writing negative letters on a typewriter or computer made from petrochemicals, sitting in a chair stuffed with material made from propylene oxide, and can be wearing clothing made from polyester and wearing glasses made of plastic. Then they can drive to the post office to mail the letter — that speaks of all the ills of our industry — in a car with parts made from plastics and specialty chemicals. Yet they'll comment on one minor section, one inconsequential product that they believe creates environmental challenges, and suggest that plastics are bad and should not be produced.
Resin buying will also change in the future. The processor will buy from fewer companies because of consolidation stemming from heavy losses in products such as polypropylene. Overproduction of petrochemical products has created massive losses not previously experienced in the history of the industry.
Buyers of resin will have to be aggressive, and loyalty will be critical. One can't shift from supplier to supplier to save a half-cent a pound. We're going to see that type of business disloyalty stop in the future. In my opinion, buyers will be directed to certain suppliers and suppliers will be locked in to resin buyers to protect pricing, quality and service. This evolution will be healthy because, right now, it's a free-for-all, and huge producers are scared, and they're losing a great deal of money in polymers. It's changing as we speak.
I would like to believe we have been a responsible and significant addition to the petrochemicals and plastics businesses. Today, as we broach the new millennium, virtually everything you see, feel, touch or wear has products or ingredients originating in the petrochemicals industry, and many are plastic-related.
It was a marvelous decision made by our family three decades ago to risk everything and build our business in this industry.
We've always tried to look at where we'll be three or five or 10 years from now, and hopefully we will be on the cutting edge. So far, we've been relatively successful and very, very lucky.