Huntsman Cuts Outlook After Q2 Miss, Polyurethanes Drag

Huntsman Corporation missed Wall Street estimates for the second quarter and cut its full-year guidance, pinning the blame on a polyurethanes business that has not recovered as fast as management expected.

The chemical maker reported adjusted earnings of 9 cents a share, 6 cents below the consensus estimate compiled by the company. Revenue came in at $1.39 billion, roughly $50 million shy of the analyst target. Adjusted EBITDA of $36 million fell short of the $63 million the company had guided for in May.

The miss was concentrated in the polyurethanes segment, which accounts for the bulk of Huntsman's sales. Segment adjusted EBITDA was $13 million, down from $23 million a year earlier. The division lost roughly $20 million versus the internal forecast, Peter Huntsman, the company's chairman and CEO, said on the earnings call. A recovery in construction and industrial demand that the company expected to materialise by midyear did not arrive.

"We expected by now that some of the destocking would be completed and we would see a more normal seasonal uptick," he told analysts. "That has not happened."

The company now sees full-year adjusted EBITDA of $175 million to $205 million, down from the May range of $250 million to $300 million. The implied second-half run rate of roughly $140 million to $170 million is below the $178 million the company posted in the first half, even with $39 million in cost savings the company said it is tracking toward.

Phil Lister, the chief financial officer, said the company is pulling levers on costs and working capital. Free cash flow for the quarter was negative $47 million, driven by inventory rebuilds the company had planned earlier in the year. Lister said Huntsman expects to generate $150 million to $200 million in free cash flow for the full year, a target that implies a sharp swing from the first-half deficit of $100 million.

"We are not satisfied with these results," Peter Huntsman said. "We are taking action to reduce costs and align our production with the demand we are actually seeing."

Huntsman's Alpha Score of 63 still rates it as a Moderate pick in the Financials sector, but the guidance cut shifts the narrative from cyclical recovery to cash preservation. The company suspended its share buyback in the second quarter and said it would prioritise debt reduction and the dividend.

The performance chemicals segment held up better. Adjusted EBITDA of $52 million was roughly flat year over year, and the advanced materials unit posted $21 million, also stable. The weakness was in the commodity-facing polyurethanes business, where operating rates have fallen below 70%.

Peter Huntsman said the company does not plan to shutter capacity but will run plants at reduced rates until demand catches up. He also pushed back against suggestions that the company needs to restructure its portfolio, calling the current downturn cyclical rather than structural.

"We have been through cycles before," he said. "The question is not whether the business will recover. It is when."