Financial conditions are improving at Huntsman Corp., but the firm's Huntsman Polymers unit still is working to recover from a year in which it posted a loss of almost $600 million.
``Year on year and quarter on quarter, we're encouraged by the trends,'' Huntsman President and Chief Executive Officer Peter Huntsman said in a recent telephone interview. ``We've restructured and cut costs and we're managing costs better.''
Salt Lake City-based Huntsman Corp. posted pretax profit of more than $50 million in the first quarter of 2002 after losing almost $15 million in the same quarter last year. Pretax earnings for all Huntsman companies, including Huntsman International, was $132 million.
The restructuring and cost-cutting referred to include 800 job cuts the firm made in 2001 and $130 million chopped from annual fixed costs.
Huntsman-held firms had total sales of about $8 billion in 2001. Huntsman Polymers - a maker of polyethylene, polypropylene and specialty plastics based in Odessa, Texas - contributed about $490 million to that total, a drop of almost 30 percent from the previous year.
Most of the $594 million loss Huntsman Polymers absorbed came from an asset impairment charge of $385 million and $140 million in costs related to the closing of several lines that produced PP, styrene monomer and a specialty line of flexible polyolefins.
The impairment change came about after a re-evaluation of Huntsman Polymers' property, plant and equipment. Huntsman spokesman Don Olsen said the re-evaluation was based on current market conditions and actions taken by Huntsman since it acquired the business from Rexene Corp. for $600 million in 1997.
Peter Huntsman was quite candid in describing Huntsman Polymers performance in the intervening five years.
``We made 40 acquisitions, and 39 created value, but Odessa did not,'' Peter Huntsman said. ``It was an asset that we paid too much for and we then paid too much to complete a project that had been started there.
``We're not in business to see how many pounds we can move, we're in business to create value,'' he added. ``We'll look at what effect these write-downs and cost reductions have in the next 12-18 months. If they're not performing, we'll look to review the long-term viability of the business.''
Huntsman Corp.'s overall financial health was called into question late last year when both the parent firm and Huntsman Polymers each missed corporate debt payments. The firm is currently working with primary bondholder Credit Suisse First Boston to restructure its debt. Huntsman Chief Operating Officer Don Stanutz said the move could reduce the company's overall debt by as much as $700 million.
Huntsman explored a potential sale of portions of the company to investment firms Blackstone Capital Partners and Bain Capital LLC, but Peter Huntsman said his company is no longer negotiating with either investor.
After starting the year at ``record-low inventories,'' Peter Huntsman said his firm has seen sales pick up, but he added that company officials ``don't get the impression the economy is bouncing back with full vigor, as some commentators have said.''
``We're seeing an improvement, but not 4 percent [gross domestic product] growth,'' he said. ``Any recovery will have to come through the discipline of manufacturers willing to rationalize excess capacity. They have to act as if they're managing their own company and spending their own money.''
Huntsman is more optimistic about the firm's planned $1 billion deal with German chemicals maker BASF AG, of Ludwigshafen, Germany, to build a plant near Shanghai, China, that will produce almost 650 million pounds of polyurethane feedstocks methylene diphenyl diisocyanate and toluene diisocyanate each year.
Huntsman will use some of the TDI in its own PU works. Other partners in the project include major Chinese oil/petrochemical firm Sinopec, as well as Shaghai Chlor-Alkali Chemical Co. Ltd., Shanghai Hua Yi Group and Shanghai Gao Qiao Petrochemical Co.
``Huntsman and BASF are both anxious to get into Asia,'' Peter Huntsman said. ``We'll compete fiercely on the finished [PU] product, but we're taking a condo approach to making feedstocks. Bringing this on together will be more efficient for the market than if we each had done a project separately.''
Construction on the plant should begin later this year, with a targeted completion date of late 2005, spokesman Olsen said.