Huntsman Corporation. Merrill Lynch Chemical Conference March Polyurethanes. Advanced Materials. Performance Products. Pigments.

Transcription

1 Polyurethanes Advanced Materials Huntsman Corporation Merrill Lynch Chemical Conference March 2005 Pigments Performance Products Polymers Base Chemicals 1

2 Forward Looking Statements This presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of These forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information. When used in this presentation, the words estimates, expects, anticipates, projects, plans, intends, believes, forecasts, or future or conditional verbs, such as will, should, could or may, and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, management s examination of historical operating trends and data are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management s expectations, beliefs and projections will be achieved. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this presentation. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this presentation. Such risks, uncertainties and other important factors include, among others: our history of losses; our substantial leverage; limitations on flexibility in operating our business contained in our debt agreements; we are a holding company with no independent operations; cyclical demand for our products; increases in interest rates as a result of our variable rate indebtedness; pricing pressure from our customers; technological change and innovation; risks associated with our non-u.s. operations; fluctuations in currency exchange rates; high competition in the markets in which we operate; adverse changes to environmental, health and safety regulations; operating hazards in our production facilities; our auditors have reported several material weaknesses in our internal controls; inability to achieve expected cost savings; difficulties in securing the raw materials we use; our ability to realize the full value of our intangible assets; our ability to attract and retain skilled employees, particularly research scientists, technical sales professionals and engineers; our ability to protect our intellectual property rights; and the possibility that our owners interests will conflict with ours. There may be other factors that may cause our actual results to differ materially from the forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this presentation and are expressly qualified in their entirety by the cautionary statements included in this presentation. We undertake no obligation to update or revise forward-looking statements which may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. 2

3 Huntsman Corporation Company Overview Peter Huntsman Financial Overview Kimo Esplin 3

4 Huntsman Growth Story Revenue ($ in Billions) $12 $11 $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $ Compounded Annual Growth Rate: ~24% Shell PP American Hoechst Monsanto MAn/LAB Texaco Chemical Nova Styrenics Sale Packaging Spinoff 1996 Rexene Texaco PO/MTBE Dow Ethyleneamines and Rhodia Surfactants ICI Vantico Huntsman has been a leader in the consolidation of the global chemical industry 4

5 A Diversified Chemical Company Base Chemicals Polymers Pigments Performance Products Advanced Materials Polyurethanes Adhesives Ethylene Surfactants Surface Technologies MDI Propylene Butadiene Cyclohexane Paraxylene MTBE Polyethylene Polypropylene APAO EPS Titanium Dioxide (TiO 2 ) LAB Amines Maleic Anhydride Ethylene Oxide Ethylene Glycol Structural Composites Electrical and Electronic Materials Tooling and Modeling Materials TDI Propylene Oxide Polyols Aniline Nitrobenzene 5

6 Significant Vertical Integration OLEFINS LBS/YR OLEFINS ETHYLENE ETHYLENE: 4.5 BILLION 4.5 Bn PROPYLENE PROPYLENE: 2.3 BILLION 2.4 Bn CRUDE BUTADIENE 400 MILLION AROMATICS BENZENE TOLUENE XYLENE HYDROGEN Purchased Crude Butadiene C4s BASE CHEMICALS Natural Gas Natural Gas Liquids (NGLS) Napthas Fractionation MTBE 42029,000 MM Gallons BPD N-Butane BUTADIENE BILLION Bn Lbs. LBS. CYCLOHEXANE BILLION Bn. Lbs LBS. PARAXYLENE MILLION MM Lbs. LBS. PERFORMANCE PRODUCTS ETHYLENE OXIDE BILLION Bn Lbs. LBS. ETHYLENE GLYCOLS MILLION MM Lbs. LBS. SURFACTANTS BILLION Bn Lbs. LBS. GLYCOL ETHERS 60 MILLION LBS. LINEAR ALKYLBENZENE MILLION MM Lbs. LBS. PERFORMANCE AMINES CHEMICALS 960 MM Lbs. 1 BILLION LBS. MALEIC ANHYDRIDE MILLION MM LBS. LBS. POLYMERS POLYPROPYLENE BILLION Bn Lbs. LBS. APAO MILLION MM Lbs. LBS. LDPE MILLION MM Lbs. LBS. OCTENE LLDPE MILLION MM Lbs. LBS. STYRENE MILLION MM Lbs. LBS. EPS/PS MILLION MM Lbs. LBS. POLYURETHANES PROPYLENE GLYCOLS MILLION MM Lbs. LBS. PROPYLENE OXIDE MILLION MM Lbs. LBS. POLYOLS MILLION MM Lbs. LBS. TDI MILLION MM Lbs. LBS. POLYURETHANE POLYURETHANE SYSTEMS SYSTEMS 500 MILLION LBS. MDI BILLION Bn Lbs. LBS. ANILINE BILLION Bn Lbs. LBS. NITROBENZENE BILLION Bn Lbs. LBS. TPU MILLION MM Lbs. LBS. PIGMENTS Texaco Rexene and Acquisition Monsanto TITANIUM DIOXIDE Acquisitions KT ADVANCED Advanced Materials MATERIALS WATER TREATMENT CHEMICALS EPOXY FORMULATIONS LIQUID EPOXY LIQUID EPOXY RESINS 275 MILLION LBS. RESINS 1999 ICI Acquisitions, Vantico AandW Surfactants Acquisition Purchased bisphenol-a Epichlorohydorin N-Paraffin 6

7 Financial Snapshot 2004 Revenue (1) : $11.5 billion 2004 Adjusted EBITDA (2) : $1.2 billion Base Chemicals 26% Polyurethanes 25% Base Chemicals 23% Polyurethanes 32% Polymers 13% Pigments 9% Performance Products 17% Advanced Materials 10% Polymers 7% Pigments 8% Performance Products 15% Advanced Materials 15% Differentiated Commodity Non-petrochemical commodity Huntsman is one of the largest publicly traded chemical companies in the US (1) Percentage allocations in the segment revenues chart reflect the allocation of all intersegment revenue eliminations in our Base Chemicals segment. (2) Adjusted EBITDA excludes restructuring and plant closing costs, loss on the sale of accounts receivables and other unusual items; segment allocation is before corporate and other unallocated items, for a reconciliation of Adjusted EBTIDA to net income/(loss) see the appendix at the end of this presentation. 7

8 Huntsman s Profile Similar to Dow 10 Year Average Segment Profitability Average PF EBIT Average PF EBIT (1) Performance Products Polyurethanes Advanced Materials 66% Differentiated Businesses Agricultural Sciences Performance Plastics Performance Chemicals 63% Differentiated Businesses Geographic Distribution Europe 38% ROW 10% (1) Source: Wall Street Research Note: PF EBIT before unallocated corporate charges 2004 Sales 2004 Sales North America 52% ROW 22% Europe 36% North America 42% 8

9 Leading Market Positions Product Market Position (1) Polyurethanes Advanced Materials Performance Products Pigments Polymers Base Chemicals MDI Polyurethane Catalysts Propylene Oxide (PO) Araldite Adhesive Epoxy Powder Coating Systems Aerospace Composites Electrical Insulating Materials Polyetheramines Morpholines/DGA and Gas Treating Ethylene and Propylene Carbonates Maleic Anhydride (MAn) Ethyleneamines Sulfonated Surfactants Ethanolamines Linear Alkylbenzene (LAB) Ethoxylated Surfactants Ethylene Oxide Titanium Dioxide APAO Expandable Polystyrene Octene LLDPE Cyclohexane Paraxylene #2 Globally, #1 in North America #2 Globally #3 in North America #1 Globally #1 Globally #1 Globally #1 Globally #1 Globally #1 Globally #1 Globally #2 Globally, #1 in North America #2 Globally #2 in Europe #2 in North America #2 in North America #3 in North America, #3 in Europe #3 in North America #4 Globally, #1 in Europe #2 Globally #2 in North America #4 Globally #2 in North America, #2 in Europe #4 in Europe (1) Source: Nexant, CMAI, IBMA and Company Estimates 9

10 Extensive Global Reach Manufacturing Facilities Polyurethanes Advanced Materials Pigments Base Chemicals and Polymers Performance Products 10

11 Base Chemicals 2004 Revenue: $3.0 Billion; 23% of 2004 Adjusted EBITDA Products Capacity & Operating Leverage Other 22% Ethylene 30% Product Ethylene Propylene Capacity 4.5 Bn Lbs 2.4 Bn Lbs Potential Upside (1) $45mm $24mm Paraxylene 7% Benzene 6% Butadiene 7% Cyclohexane 14% Propylene 14% Cyclohexane 1.4 Bn Lbs $14mm Butadiene 1.1 Bn Lbs $11mm Benzene 1.7 Bn Lbs $17mm Paraxylene 800 MM Lbs $8mm 73% Flexible Capacity for Ethylene (1) 1 cent / lb leverage U.S. Ethylene Cash Margin and Utilization Rate Huntsman European Competitive Position % $500 Cash Margin (Cents / Lb) Source: CMAI Cash Margin (Cents / Lb) Utilization Rate 2005E % 90% 85% 80% 75% Utilization Rate Ethylene $ / MT of ($ Ethylene / MT) $400 $300 $200 $100 $ Cumulative Capacity (MT/Year) Source: Nexant

12 Polymers 2004 Revenue: $1.5 Billion; 7% of 2004 Adjusted EBITDA Products W.E. LDPE Cost Curve APAO 3% EPS 11% Styrenics 15% Olefins 14% Polypropylene 34% 2002 Cash Cost ($ $/ / MT) $1,150 $1,100 $1,050 $1,000 $950 $900 $850 $800 Proposed Wilton Plant Polyethylene 23% Cumulative Capacity in MT Source: Nexant 2002 and Company estimates Polyethylene and Polypropylene Margins N.A. LDPE Cash Margin 35 Relative Margin (Cents / Lb) Polyethylene Huntsman Industry Polypropylene Cash Margin (Cents / Lb) E 2005E nd Quartile Margin Source: Townsend Associates st Quartile Margin Source: CMAI Cash Margin (Cents / Lb) 12

13 Pigments 2004 Revenue: $1.0 Billion; 8% of 2004 Adjusted EBITDA End Markets Paper 1% Inks 6% Others 3% Plastics 31% Coatings 59% TiO 2 U.S. Price and Global Utilization Rate Global Market Participants US Price ($ / MT) $2,500 $2,000 $1,500 $1, US Price ($/MT) Global Operating Rate 2007E 2006E 2005E 99% 95% 91% 87% 83% 79% 75% Global Operating Rate Other 29% Kronos 11% Huntsman 12% DuPont 23% Lyondell 14% #1 in Europe Kerr McGee 12% Source: CMAI and Wall Street Research Source: IBMA

14 Performance Products 2004 Revenue: $1.9 Billion; 15% of 2004 Adjusted EBITDA Revenue Split by Business Units Maleic & Licensing 6% Performance Specialties End Markets Chemical Intermediates 17% Other 5% Agrochemical 14% Performance Intermediates 61% Performance Specialties 33% Emulsion Polymers 4% Solvents 4% Construction 6% Metal, Mining & Oilfield 7% PU Foams Fuels & Lubes 7% 7% Epoxy Curatives 13% Paper & Water 9% Gas Treating 4% Ceramics & Electronics 3% Performance Intermediates Value Chain External Sales via Pipeline Performance Specialties Ethanolamines Huntsman Base Chemicals Ethylene Benzene EO Surfactants Ethylene Glycol Linear Alkyl Benzene 14

15 Performance Products Strong Specialty Position Performance Specialties Competitive Landscape Amine Chemistry Ethyleneamines Akylalkanolamines Polyetheramines Sub. Propylamines Morpholine / DGA Alkylamines Ethanolamines Huntsman BASF DOW AKZO Air Products Polyetheramines Growth Maleic Anhydride NA Cost Position CAGR = 12.2% Average Million Lbs Cash Cost Competitor Competitor Competitor A B C 88% 95% 107% 110% Source: Company Estimates Total Cumulative Capacity (MM Lbs) Source: Company Estimates and Nexant 15

16 Advanced Materials 2004 Revenue: $1.2 Billion; 15% of 2004 Adjusted EBITDA Business Overview Base Resins Coatings Tooling and and Modeling Materials Electrical Insulation Materials Electronics Adhesives Structural Composites Commodity The Epoxy Resin Value Chain Specialty Base Raw Material Commodity Intermediates Production Formulations Chlorine Propylene Phenol Acetone Epichlorohydrin Bis-Phenol A Liquid Epoxy Resins Multi-functional resins; cross-linking agents; matting and curing agents; reactive diluents RPP 16

17 Advanced Materials Products and End Markets Electrical Insulation Materials 14% Tooling & Modeling Materials 9% Revenue Split - Product Mix Electronics 5% Base Resins 19% Adhesives 12% Sales ($ in millions) Adhesives: A Track Record for Growth CAGR = 14% Coatings 22% Structural Composites 20% MW 28,000 21,000 14,000 Annual Global Wind Power Development Existing capacity Existing capacity Forecast Forecast Offshore (Forecast) (Forecast) Prediction 7, Source: BTM Consult ApS - March

18 Polyurethanes 2004 Revenue: $2.9 Billion; 32% of 2004 Adjusted EBITDA End Markets Others 31% Construction 24% Adhesives & Coatings 7% Furniture 7% CWP 7% Footwear & Elastomers 5% Automotive 10% Appliances 9% Global MDI Market Share Others 16% Huntsman 24% Dow 16% BASF 20% Bayer 24% Source: Nexant

19 Polyurethanes Focus is on the Highest Growth MDI Segment Global Polyurethanes Demand by Product Global MDI Demand 110 3,500 ASP Index (2003) TDI TDI 3.1 bnlbs 3.1 Bn Lbs. Less Attractive Less Attractive MDI 6.6 Bn Lbs. More Attractive Polyols Polyols bnbn lbs Lbs. PO PO bn lbsbn Lbs. More Attractive MDI 6.6 bn lbs 2% 3% 4% 5% 6% 7% 8% 9% Volume Growth Rate % ( ) Thousands of Metric Tons 3,000 2,500 2,000 1,500 1, CAGR = 7.4% Note: Size of bubble represents 2003 Global Volume Source: Nexant; Market Size & Pricing Index based on Internal MDI ASP Source: Nexant 2004 US W. Europe Asia ROW The Right Mix in Urethanes Global MDI Cash Cost Curve Huntsman Dow BASF Bayer Lyondell 0% 20% 40% 60% 80% 100% MDI TDI Polyols PO Note: Bayer has fixed captive PO supply through take or pay purchase agreements with Lyondell Source: Nexant 2003 Cost Index ,000 2,000 3,000 4,000 5,000 6,000 Total Nameplate Capacity (MM Lbs) Source: Nexant 2003 and company estimates with regard to the proposed China plant. Proposed China Plant 19

20 Polyurethanes Global MDI Production Pounds in Millions % Change Current Capacity '05 - '06 Additions 2007 Capacity Geismar, Louisiana % Rozenburg, Netherlands % Caojing, China N/A Total 1, ,135 40% Growing at 7-8% per annum ( 04E growth at 11%) 2004E Global MDI Demand (1) Total Estimated Industry MDI Capacity (2) 6.8 Bn lbs 6.9 Bn lbs = 98% Global Capacity Utilization (1) Nexant 2005 (2) Company estimate 20

21 Track Record of Cost Reduction North America Cost Reduction ( 99 02) Eliminated 800+ full-time and 300 contract positions Closed Odessa, TX styrene (330 million lbs) and polypropylene (65 million lbs) facilities Consolidated Austin, TX R&D Project Coronado Over $200mm in annual cash costs to be eliminated by beginning of 2006 Approximately 50% complete Closure / consolidation of manufacturing, technical and administration sites Huntsman LLC (North America) Cash Fixed Costs Huntsman Corporation Cash Fixed Costs $800 $2,300 23% Overall Decrease $2,100 3% p.a. Inflation $ in Millions $700 $600 $ in Millions $1,900 $1,700 $200 $1,500 $ $1, H 04 Run-Rate Objective for 2005 * Fixed Currency Basis

22 Huntsman Corporation Kimo Esplin EVP and Chief Financial Officer Company Overview Peter Huntsman Financial Overview Kimo Esplin 22

23 Financial Strategy Pay down $2 billion of debt with free cash flow Maintain approximately $1 billion of liquidity Evaluate common dividend when leverage targets achieved Simplify financial and legal structure 23

24 Financial Performance ($ in Millions) $12,000 $10,500 $9,000 $7,500 $8,012 Annual Revenue Annual Adjusted EBITDA (1) $9,252 $11,486 ($ in Millions) $1,500 $1,200 $900 $600 $794 $792 $1,240 $6,000 $300 $4,500 $0 PF (2) 2002 PF (2) PF (2) 2002 PF (2) Quarterly Revenue Quarterly Adjusted EBITDA (1) ($ in Millions) ($ in Millions) $3,500 $3,000 $2,500 $3,128 $2,947 $2,639 $2,772 $2,302 $2,370 $500 $450 $400 $350 $300 $250 $200 $327 $288 $222 $223 $178 $402 $2,000 $150 $100 $50 $1,500 Q3 '03 Q4 '03 Q1 '04 Q2 '04 Q3 '04 Q4 '04 (1) Adjusted EBITDA excludes restructuring and plant closing costs, loss on the sale of accounts receivables and other unusual items (2) Pro forma as if Huntsman had acquired the remaining interest in HIH as of January 1, 2002 and 2003 and its interest in Advanced Materials as of January 1, 2002 and 2003 $0 Q3 '03 Q4 '03 Q1 '04 Q2 '04 Q3 '04 Q4 '04 24

25 Capital Investments Will Be Focused EO / EG Modernization / Rozenberg MDI Expansion ($ in Millions) $800 $700 Advanced Materials Plants in India and China Odessa Modernization and Expansion Greatham TiO 2 Expansion TiO 2 SAP European Aromatics Upgrade Chinese MDI JV UK LDPE $600 $500 Geismar MDI Expansion NA SAP $400 $300 $200 $100 Estimated Sustenance Level of CapEx 1 = $200 million $ E (1) Includes Maintenance, EH&S and capital required to sustain competitive position Note: Pro forma capital expenditures 25

26 Commodity Cycle Upside $2,500 Adjusted EBITDA ($ in Millions) $2,000 $1, Additional Ethylene Margin vs (2) 1995 PF vs Commodity EBITDA (1) Coronado Cost Savings $1, Adjusted EBITDA 2004 Adjusted EBITDA $500 $0 (1) Polymers, Base Chemicals, Pigments (2) CMAI Ethylene incremental ( 95 vs. 88/ 89) cpp x Huntsman Capacity 26

27 Significant Deleveraging Pro Forma Net Debt and Interest Reduction Tax Assets NetDebt ($ in Millions) $8,000 $6,000 $4,000 $6,048 20% $4,855 $613 31% $424 $750 $600 $450 $300 $150 Interest Expense ($ in Millions) $3.1 billion in gross deferred tax assets $2,000 Year ended $0 Actual As Adjusted (2) Actual PF (1) (1) Annualized run-rate beginning 2Q05 given current debt levels and market interest rates (2) Amounts reflect as adjusted after giving effect to the application of the net proceeds from the initial public offering 27

28 IPO Sources and Uses ($ in millions) Sources Uses Gross Primary IPO Proceeds $1,281 Redeem 15% HMP Notes due 2008 $591 (55.6 million shares) Convertible Preferred Proceeds (5.8 million shares) Gross Selling Shareholder Proceeds (13.6 million shares) Available Cash Redeem 13 3 / 8 % HIH Notes due 2009 Gross Selling Shareholder Proceeds Redeem 11 5 / 8 % HLLC Sr. Secured Notes due 2010 Redeem HLLC Sr. Notes due 2012 Collateral Deposit for Convertible Preferred Dividends Repay Loan Due Affiliate 42 Fees and Expenses 88 Cash 11 Total Sources $1,916 Total Uses $1,916 28

29 Capitalization as of December 31, 2004 As of December 31, 2004 Cumulative Multiple of Adj. EBITDA Actual As Adjusted (1) 2004 Cash & Cash Equivalents $252 $227 Debt Senior Secured Credit Facilities 2,154 2, x Secured Notes Unsecured Notes Subordinated Notes 1,402 1, Discount Notes 958 Other Debt Total Debt $6,300 $5, x Total Net Debt $6,048 $4, x Note: 2004 Adjusted EBITDA of $1,240 million (1) Amounts reflect as adjusted after giving effect to the application of the net proceeds from the initial public offering 29

30 Polyurethanes Advanced Materials Huntsman Corporation Questions and Answers Performance Products Pigments Polymers Base Chemicals 30

31 Appendix 31

32 Adjusted EBITDA Reconciliation $ in millions Q3 '03 Q4 '03 Q1 '04 Q2 '04 Q3 '04 Q4 '04 Net (loss) / income $ (91) $ (106) $ (85) $ (186) $ 44 $ (1) Interest expense - net Income tax expense / (benefit) (36) (3) Depreciation and amortization EBITDA Early extinguishment of debt (2) 24 Legal and contract settlement expense, net (11) 1 Loss on sale of accounts receivable Asset write down Restructuring and plant closing costs Adjusted EBITDA $ 178 $ 222 $ 223 $ 288 $ 327 $ 402 Pro Forma (1) Pro Forma (1) Net (loss) $ (167) $ (426) $ (228) Interest expense - net Income tax (benefit) / expense (10) 32 (29) Depreciation and amortization EBITDA Cumulative effect of accounting change (167) - - Early extinguishment of debt 7-26 Legal and contract settlement expense, net (9) 8 7 Loss on sale of accounts receivable Asset impairment, write down Restructuring and plant closing costs Reorganization costs Adjusted EBITDA $ 794 $ 792 $ 1,240 (1) Pro forma as if Huntsman had acquired the remaining interest in HIH as of January 1, 2002 and 2003 and its interest in Advanced Materials as of January 1, 2002 and