Huntsman (HUN) Q4 2015 earnings summary

Executive summary

• 2015 was a transition year: differentiated downstream businesses grew more than 10% and generated over 80% of operational earnings, while cyclical chemicals and TiO2 faced weaker earnings.

• Priorities were improving free cash flow, growing differentiated downstream businesses, and pursuing separation of the TiO2 business.

Financial highlights

• FY 2015 revenue was $10.299B, down 11% YoY; gross profit was $1.848B, down 4%; operating income was $405M, down 36%.

• Net income attributable to stockholders was $93M vs. $323M in 2014; adjusted net income was $492M vs. $478M, and adjusted diluted EPS was $2.00 vs. $1.94.

• Adjusted EBITDA was $1.221B vs. $1.340B; EBITDA was $741M vs. $1.022B.

• Operating cash flow was $575M vs. $760M; capital expenditures were $663M before $15M of reimbursements.

Outlook and guidance

• 2016 free cash flow was expected to improve by $350M, including $200M lower capex, $100M lower restructuring spending and $50M lower operating spending; no large maintenance projects were planned.

• 2016 capex was projected at $450M net of reimbursements; full-year and long-term effective tax rates were each expected to be ~30%.

• Cyclical businesses, particularly MTBE, ethylene and TiO2, were expected to pressure 2016 profitability, with differentiated downstream businesses expected to improve.

• Segment outlook: Polyurethanes adjusted EBITDA improvement; Performance Products similar to 2015; moderate increases in Advanced Materials and Textile Effects; Pigments and Additives slightly positive.

• The TiO2 separation remained under active exploration, including options beyond an IPO or spin-off, subject to market conditions and board approval.