Executive Summary / Key Takeaways

• Strategic Transformation Underway: Huntsman Corporation is actively reconfiguring its global footprint and cost structure, shedding underperforming assets and implementing aggressive cost reduction programs totaling over $280 million since 2022, with an additional $50 million program targeting polyurethanes by late 2025. This aims to create a leaner, more agile specialty chemical enterprise.
• Technological Differentiation as a Moat: The company is investing in advanced materials and performance products, including its Miralon carbon nanomaterials for EV batteries and E-GRADE® specialty amines for semiconductors. These innovations offer tangible benefits like enhanced energy efficiency and superior performance, positioning Huntsman in high-value, less cyclical markets.
• Navigating Cyclical Trough with Financial Discipline: Despite a challenging Q2 2025 marked by a net loss of $158 million and reduced segment EBITDA across all divisions, Huntsman generated positive cash flow through rigorous working capital management. The company maintains strong liquidity of $1.287 billion and remains committed to its dividend, viewing it as a "sacred" priority.
• Cautious Optimism for Market Recovery: Management anticipates a gradual market improvement in the second half of 2025, driven by potential interest rate cuts stimulating North American construction, a slow recovery in Chinese consumer confidence, and the impact of MDI tariffs. Inventories across downstream supply chains remain "very low," suggesting potential for a rapid rebound.
• Competitive Positioning and European Challenges: Huntsman holds a mid-tier position in the global chemicals market, differentiating through specialized formulations and regional production. However, it faces intense competition from larger, more integrated players like Dow (DOW) and LyondellBasell (LYB), and continues to grapple with the high costs and uncertain industrial policy in Europe, which has led to significant asset rationalization.

A Chemical Giant's Strategic Evolution: Setting the Scene

Huntsman Corporation, founded in 1970, has evolved into a global manufacturer of diversified organic chemical products, operating primarily through its Polyurethanes, Performance Products, and Advanced Materials segments. The company's foundational strategy, influenced by its history with Imperial Chemical Industries, emphasizes regional production, with over 90% of its output sold within the respective regions of manufacture. This approach aims to minimize reliance on volatile global trading and enhance supply chain resilience. Huntsman's products are integral to a wide array of applications, from adhesives and automotive components to construction materials, electronics, and power generation, often contributing to energy conservation through premium insulation and lightweighting solutions.

The chemical industry is inherently cyclical, heavily influenced by macroeconomic factors such as interest rates, global trade policies, and energy costs. Recent years have presented unprecedented volatility, particularly stemming from geopolitical shifts and trade disputes. Huntsman's strategic response has been to proactively reconfigure its operations, focusing on elements within its control: cost structure, asset footprint, and technological differentiation.

Technological Edge: The Engine of Differentiation

Huntsman's competitive moat is significantly bolstered by its differentiated technology and ongoing innovation. Within its Advanced Materials segment, the company develops technologically advanced epoxy, phenoxy, acrylic, polyurethane, and acrylonitrile-butadiene-based polymer formulations, alongside high-performance thermoset resins, curing agents, toughening agents, and cutting-edge carbon nanomaterials. These innovations provide tangible benefits, such as enabling premium insulation in homes and buildings and the lightweighting of airplanes and automobiles, directly contributing to energy conservation.

A prime example of this technological leadership is Miralon, Huntsman's carbon nanomaterials. The company has expanded its production capabilities with a 30-ton reactor, allowing for commercial-scale production and customer qualifications. A larger 5,000-ton reactor is planned for startup in 2026, aiming to improve production economics. Miralon is particularly targeted at high-growth applications like EV battery technology, with initial reporting on its progress expected later in 2025.

Beyond Advanced Materials, the Performance Products segment is also driving technological advancements. Huntsman has completed an expansion of its E-GRADE® Unit in Conroe, Texas, introducing new purification and packaging capabilities specifically designed to serve the rapidly growing semiconductor industry with chip cleaning solutions. Furthermore, an expansion of its polyurethane catalyst chemistry business in Pétfürdő, Hungary, is expected to be completed around year-end 2024, with commercial contributions anticipated in early 2025 after qualification. These investments underscore Huntsman's commitment to developing specialized, high-value products that cater to evolving industrial demands, thereby enhancing its competitive position and long-term growth prospects.

Competitive Landscape: Navigating a Fragmented World

Huntsman operates in a highly competitive global chemical market, holding a mid-tier position with an estimated 2-3% market share. Its primary direct competitors include diversified chemical giants such as Dow Inc. , LyondellBasell Industries, Eastman Chemical Company (EMN), and Celanese Corporation (CE).

Huntsman differentiates itself through a focus on specialized, high-margin formulations for niche applications, particularly in aerospace, automotive coatings, and electronics. Its products are designed to offer superior performance, such as 10-15% greater efficiency in energy-intensive processes, which can translate into cost savings for customers. This contrasts with the broader, more commoditized offerings of larger players like Dow and LyondellBasell, who benefit from immense scale and integrated supply chains, often achieving 5-10% lower operating costs in their respective segments.

Financially, Huntsman's latest TTM performance (as of Q2 2025) reflects the challenging market conditions. Its Gross Profit Margin of 13.74% is competitive with Dow (11%) and LyondellBasell (11%), but lags Eastman Chemical (24%) and Celanese (23%). Huntsman's Operating Profit Margin of 0.10% significantly trails Dow (4%), LyondellBasell (5%), and Eastman Chemical (14%), though it is better than Celanese's -7%. The Net Profit Margin of -5.49% indicates current unprofitability, though it is less negative than Celanese's -15%.

A notable strength for Huntsman is its Debt/Equity Ratio of 0.29%, which is significantly lower than Dow (1.02%), LyondellBasell (1.04%), Eastman Chemical (0.87%), and Celanese (2.50%), indicating a stronger balance sheet.

Huntsman's regional production model, where over 90% of its output is sold within the region of production, provides a strategic advantage in mitigating global trade volatility. However, the company faces vulnerabilities from high customer concentration, with 10-15% of sales from its top clients, which can lead to revenue volatility. The company's strategic response involves aggressive cost discipline and a continuous review of its asset portfolio to align with market realities, particularly in Europe where high energy costs and a lack of supportive industrial policy have led to significant asset rationalization.

Financial Performance & Liquidity: Resilience in a Trough

Huntsman's second quarter 2025 results underscore the challenging market environment, yet reveal management's disciplined approach to cash preservation. The company reported a net loss attributable to Huntsman of $158 million, a significant decline from a net income of $22 million in the prior-year period. Diluted loss per share stood at $0.92, compared to diluted income per share of $0.13 in Q2 2024. On an adjusted basis, the net loss was $34 million, versus an adjusted net income of $24 million in Q2 2024.
Total revenues for Q2 2025 decreased by 7% year-over-year to $1,458 million, contributing to a 6% decline in revenues for the first six months of 2025 to $2,868 million. Gross profit for the quarter fell by 25% to $182 million, leading to an operating loss of $120 million, a stark contrast to the $34 million operating income in Q2 2024.

Segment-wise, Polyurethanes saw its adjusted EBITDA drop by 61% to $31 million, primarily due to lower average selling prices in MDI (influenced by unfavorable supply/demand dynamics) and reduced sales volumes in construction markets, exacerbated by a scheduled turnaround at its Rotterdam facility. Performance Products' adjusted EBITDA declined by 30% to $32 million, driven by lower sales volumes from reduced operating rates at the Moers, Germany facility and softer market conditions. Advanced Materials experienced a 13% decrease in adjusted EBITDA to $45 million, as lower average selling prices and volumes impacted its coatings and aerospace markets. Despite these headwinds, Advanced Materials showed a "nice rebound back to what we would see as more normalized earnings."

Despite the profitability challenges, Huntsman demonstrated strong cash flow management. The company generated positive cash flow in Q2 2025, a result of its "aggressive inventory and working capital focus," which, however, incurred an approximate $25 million EBITDA cost. Net cash provided by operating activities from continuing operations for the first six months of 2025 improved to $21 million, from $8 million in the same period of 2024. Free cash flow from continuing operations, while still a use of cash at $52 million for 6M 2025, represented a significant improvement from the $100 million use in 6M 2024. The company also benefited from a $33 million net income from a litigation settlement in Q1 2025.

Huntsman's liquidity remains robust, with a combined cash and unused borrowing capacity of $1,287 million as of June 30, 2025. This includes $399 million in cash, $836 million from its revolving credit facility, and $52 million from AR programs. The company's debt maturity profile is favorable, with longer-term bonds due in 2029, 2031, and 2034. Huntsman's commitment to its dividend remains steadfast, with the Board viewing it as "sacred," and management's objective for 2025 is to ensure the dividend is fully covered.

Strategic Initiatives & Outlook: A Leaner Future

Huntsman is actively executing a comprehensive strategic transformation to enhance its long-term profitability and resilience. Since 2022, the company has implemented over $280 million in cost reductions, effectively offsetting more than $150 million in global inflationary costs. This aggressive stance continues with a new $50 million cost reduction program specifically targeting its global polyurethanes business, primarily in Europe, with the majority of these savings expected to be realized on a run-rate basis by the end of 2025.

Portfolio optimization is a key pillar of this strategy. Huntsman has divested non-core assets like the Textile Effects Business and rationalized capacity in Advanced Materials (e.g., closing BLR capacity in Alabama). A significant recent action includes the decision to close its European maleic anhydride manufacturing facility in Moers, Germany. This move, while challenging, was deemed necessary due to the facility's lack of competitiveness and high energy costs, with butane alone accounting for 85% of maleic cost in Europe. This restructuring resulted in an $88 million expense in the first half of 2025, including a $77 million asset impairment. The company is actively exploring opportunities for bolt-on acquisitions, with a strategic preference for the Advanced Materials segment, aiming to expand its footprint in high-value areas like adhesives, aerospace, lightweighting, electronics, and elastomers.

The outlook for Huntsman, while cautious, carries a degree of optimism. For the third quarter of 2025, management sees "neither reason to panic nor to be overly optimistic," but anticipates a long-term improvement in construction and a "gradual change as China seems to be focusing more on their overcapacity." The MDI industry, which saw its demand and margins drop early in the cycle, is expected to be among the first to recover. Global MDI operating rates are currently in the low to mid-80s, and Huntsman expects "better margin expansion from falling raw material prices than from rising MDI prices." The impact of tariffs on Chinese MDI imports into North America, which have "virtually stop[ped]," is expected to benefit Huntsman's domestically produced MDI. Chinese MDI prices were noted to be at a three-year high in Q4 2024, indicating some market stabilization.

Key drivers for a potential market rebound include lower interest rates, which could stimulate pent-up housing demand in North America, and a gradual recovery in Chinese consumer confidence, alongside continued infrastructure spending in Asia. Huntsman's new capacities, such as the Geismar splitter (expected to contribute $10-15 million year-on-year benefit in 2025) and the Performance Amines expansions for chip cleaning and polyurethane catalysts, are poised to contribute more meaningfully to earnings as customer qualifications and market acceptance increase through late 2025 and early 2026. Capital expenditures for 2025 are projected to be between $180 million and $190 million, funded by operating cash flow.

Risks & Challenges: Headwinds on the Horizon

Despite the strategic reorientation, Huntsman faces several pertinent risks and challenges that could impact its investment thesis. The most significant is trade volatility, which Peter Huntsman has identified as the company's "biggest issue." Unpredictable tariffs and trade disputes create a "literal disconnect between orders and downstream demand," leading to a "bullwhip effect" where suppliers panic and reduce inventories. This uncertainty can suppress volumes and hinder pricing power.

European energy policy remains a persistent headwind. Management expresses "frustration by the lack of a clear and realistic energy in European-wide industrial policy," noting that Europe's "adherence to anti-growth energy and regulatory policies" has led to a "shrinking industrial base" and a "90% drop in our chemical production in Europe" over the past 15-20 years. This high-cost environment makes it challenging for Huntsman's European operations to compete, forcing difficult decisions like the Moers facility closure.

The global MDI overcapacity also poses a risk. While Huntsman believes there's "more than enough MDI in the world today," the presence of high-cost, older facilities in Europe, combined with new capacity additions globally, could prolong margin compression. The complexity and expense of shutting down chemical facilities, especially in Europe, mean that rationalization may be slower than market conditions warrant.

Furthermore, Huntsman's debt covenants and environmental, health, and safety (EHS) costs present ongoing financial considerations. A material failure to meet AR Program metrics could trigger an early termination event, potentially leading to a default on its 2022 Revolving Credit Facility. The company also acknowledges that it may incur losses for environmental remediation in excess of accrued amounts, though it cannot estimate the potential excess. Lastly, while committed to its dividend, a prolonged "muted cycle or a global recession" extending into early 2026 could necessitate a re-evaluation of its dividend policy, despite current confidence in cash generation.

Conclusion

Huntsman Corporation is in the midst of a profound strategic reorientation, transforming into a more focused, cost-efficient, and technologically advanced specialty chemical company. The aggressive cost reduction programs, coupled with a disciplined approach to portfolio optimization and asset rationalization, are designed to fortify its financial resilience amidst a volatile global landscape. By shedding underperforming assets and investing in differentiated technologies like Miralon and E-GRADE® specialty amines, Huntsman is strategically pivoting towards higher-value, less cyclical end-markets such as EV batteries and semiconductors.

While the company faces persistent macro headwinds, particularly in European energy policy and global trade volatility, its strong balance sheet, ample liquidity, and commitment to its dividend provide a stable foundation. The cautious optimism for a gradual market recovery, driven by potential interest rate cuts and a rebound in key end-markets like North American construction and Chinese automotive, positions Huntsman to leverage its leaner cost structure and technological leadership. For discerning investors, Huntsman represents a compelling opportunity to participate in a company actively reshaping its destiny, poised to unlock significant value as market conditions normalize and its strategic initiatives bear full fruit.