Huntsman (HUN) Q4 2016 earnings summary

Executive summary

• Generated record free cash flow of $686 million in 2016, nearly double the $350 million commitment; repaid $560 million of debt and strengthened the balance sheet.

• Differentiated MDI volumes rose 6% and represented 85% of MDI EBITDA; total MDI EBITDA increased 9% YoY.

Financial highlights

• FY 2016 revenue was $9.657 billion, down 6% YoY; gross profit fell 9% to $1.678 billion, while operating income rose to $647 million from $405 million.

• Net income attributable to shareholders was $326 million vs. $93 million in 2015; adjusted net income was $377 million vs. $492 million, and adjusted diluted EPS was $1.57 vs. $2.00.

• Adjusted EBITDA was $1.127 billion, down 8% YoY; operating cash flow increased to $1.088 billion from $575 million.

• Adjusted for the $98 million pretax gain on the European surfactants sale, other operating income, net, increased; 2016 restructuring costs were $81 million vs. $302 million in 2015.

Outlook and guidance

• 2017 free cash flow is expected to exceed $350 million; planned capital expenditures are approximately $400 million, with funding expected from operating cash flow.

• Adjusted effective tax rate is expected to be slightly below the approximately 30% long-term rate in 2017; the 2016 adjusted rate was 22%.

• Pigments and Additives separation was targeted for Q2 2017; approximately $100 million of non-recurring separation costs were expected in 2017, including capital and financing costs.

• Advanced Materials outlook cited a strong aerospace market representing more than one-third of segment earnings; planned maintenance and lower-than-historical margins were expected in parts of other segments.