Huntsman Corporation. Deutsche Bank Leverage Finance Conference September 2005

Transcription

1 Huntsman Corporation Deutsche Bank Leverage Finance Conference September 2005

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 Hurricane Update Katrina Rita Very little physical damage to Huntsman facilities Limited production interruptions Geismar, LA (MDI & Polyols) Pensacola, FL (MAn) Logistics still problematic Operations suspended at all Texas Gulf Coast facilities beginning September 22nd Restart dependant on staffing and feedstock availability = Huntsman Facilities 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 Differentiated Chemicals Commodity Chemicals Advanced Materials Polyurethanes Performance Products Polymers Pigments Base Chemicals Coating, Construction & Adhesives Design, Composites & Engineering Power & Electronics MDI Propylene Oxide Polyols Aniline Nitrobenzene Surfactants LAB Amines Maleic Anhydride Ethylene Oxide Ethylene Glycol Polyethylene Polypropylene APAO EPS Titanium Dioxide Ethylene Propylene Butadiene Cyclohexane Paraxylene 5

6 Financial Snapshot LTM Revenue (1) : $12.7 billion LTM Adjusted EBITDA (2) : $1.65 billion Base Chemicals 27% Polyurethanes 26% Base Chemicals 23% Polyurethanes 34% Polymers 13% Pigments 8% Performance Products 16% Advanced Materials 10% Differentiated Polymers 9% Pigments 8% Advanced Performance Materials Products 12% 14% 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 to our Base Chemicals segment. (2) Adjusted EBITDA excludes restructuring and plant closing costs, loss on the sale of accounts receivables, discontinued operations and other unusual items; segment allocation is before corporate and other unallocated items. 6

7 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% North America 52% (1) Source: Wall Street Research Note: PF EBIT before unallocated corporate charges 2004 Sales 2004 Sales ROW 22% Europe 36% North America 42% 7

8 Base Chemicals LTM Revenue: $3.5 Billion; 23% of LTM Adjusted EBITDA Products Capacity (lbs. in millions) Other 22% Ethylene 30% Product Ethylene Propylene U.S. 2,600 1,500 Europe 1, Total 4,500 2,380 Paraxylene 7% Benzene 6% Butadiene 7% Cyclohexane 14% Propylene 14% Cyclohexane ,355 Butadiene ,125 Benzene 480 1,200 1,680 Paraxylene % Flexible Capacity for Ethylene Effective Capacity Utilization Rates Have Increased Sharply Huntsman European Competitive Position Effective Ethylene Operating Rate 100% 95% 90% 85% Q305E Q205 Q105 Q404 Q304 Q204 Q104 Q403 Q303 Q203 Q103 Q406E Q306E Q206E Q106E Q405E Ethylene $ / MT ($ of / Ethylene MT) $ $ $ $ $ $ C u m u la tiv e C a p a c ity (M T /Y e a r) Source: CMAI W. Europe U.S. Source: Nexant

9 May '04 Jul '04 Sep '04 Nov '04 Jan '05 Jan '04 Mar '04 Regional Economics $175 $150 $125 $100 $75 $50 $25 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 Europe North America 9 $600 $500 $400 $300 $1,000 $900 $800 $700 Mar '05 May '05 Jul '05 Sep '05E Segment Adjusted EBIDTA - $s in mms Naptha (US$/MT) W. Europe Ethylene Contract Price (US$/MT) Naptha W. Europe Ethylene Price

10 Performance Products LTM Revenue: $2.1 Billion; 14% of LTM Adjusted EBITDA Revenue Split by Business Units Maleic & Licensing 6% EBITDA (1) Split by Business Units Performance Specialties 29% Maleic & Licensing 26% Performance Specialties 29% Performance Intermediates 65% Performance Intermediates 45% (1) YTD June 30, 2005 Performance Intermediates Value Chain External Sales via Pipeline Performance Specialties Ethanolamines Huntsman Base Chemicals Ethylene Benzene EO Surfactants Ethylene Glycol Linear Alkyl Benzene 10

11 Performance Products Strong Specialty Position Performance Specialties Competitive Landscape Announced Capacity Expansions Amine Chemistry Ethyleneamines Akylalkanolamines Polyetheramines Sub. Propylamines Morpholine / DGA Alkylamines Ethanolamines Huntsman BASF DOW AKZO Air Products Maleic Anhydride - 40% Ethyleneamines 40% Ethylene Carbonates 30% Polyetheramines 25% Ethanolamines 17% Polyetheramines Growth Maleic Anhydride NA Cost Position CAGR = 10% 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 11

12 Advanced Materials LTM Revenue: $1.2 Billion; 12% of LTM Adjusted EBITDA Business Overview Coating Systems, Coatings Construction & Adhesives (49% of Revenues) Design, Composites & Coatings Engineering (26% of Revenues) Power & Electronics (25% of Revenues) 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 Commodity The Epoxy Resin Value Chain Specialty 12

13 Electrical Insulation Materials Generation Transmission Distribution Consumer High Voltage (HV) Medium Voltage (MV) Low Voltage (LV) % of Revenues Generators & Motors Insulators & Bushings, Instrument Switchgears & Transformers Cast resin transformers (DDT) Epoxy Insulators 8% 18% 34% 20% 20% From Power Plant to the Home 13

14 Structural Adhesives We make a broad spectrum of structural adhesives used to assemble products in manufacturing industries and consumer markets. Market sectors served include: Engineering Adhesives Aerospace Electronics Liquid Natural Gas DVDs OEMs in various industries Do-It-Yourself (DIY) 14

15 Structural Composites Windmill blade production Energy From resin solutions & fibers Aerospace production Transportation Electro laminating production Communication Ski production Sport & leisure 15

16 Substituting Traditional Materials Aerospace Airbus A380 Inaugural flight 27 April 2005 Double-decked fuselage weighs 308 tonnes Each plane contains 7.5 tons of Huntsman Advanced Materials high performance resins Resins to be sourced from Monthey, Switzerland 16

17 Polyurethanes LTM Revenue: $3.3 Billion; 34% of LTM 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% Source: Nexant 2004 BASF 20% Bayer 24% 17

18 Polyurethanes Global MDI Market 3,500 Global MDI Demand Global MDI Cash Cost Curve Thousands of Metric Tons 3,000 2,500 2,000 1,500 1, Source: Nexant 2004 CAGR = 7.4% US W. Europe Asia ROW Cost Index Tight Global Market Conditions 0 1,000 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 Pounds in Millions 2004 Capacity Additions 2007 Capacity % Change Geismar, Louisiana % Rozenburg, Netherlands % Caojing, China N/A Total 1, ,135 40% Growing at 7-8% per annum (2004E growth at 11%) (1) Nexant E Global MDI Demand (1) Total Estimated Industry MDI Capacity (1) 6.8 Bn lbs 6.9 Bn lbs 18 = 98% Global Capacity Utilization

19 Construction Insulation Key Drivers for Growth Energy Transport Food Supply Chain Energy Cost Energy Legislation Insulation Opportunities Energy Conservation Building Codes New Emerging Middle Class Key Drivers Converging Forces 19 Construction Renovation

20 Construction Insulation Growing the Market Market Share Insulation Efficiency PU 7.0 PU EPS R-factor EPS MW XPS Source: Freedonia 2004; Frost & Sullivan Rock Wool & Fiberglass 0.0 MDI offers the most cost-effective solution at higher insulation requirements Global insulation market growing at 5% per annum (1) Polyurethanes are only 8% of the global insulation market (1) Polyurethane insulation growing at over 10% per annum (1) Huntsman is global leader in polyurethane insulation market with 35%+ market share (1) (1) Freedonia

21 Composite Wood Products Growth Drivers Drivers for Growth - Productivity Growth of timber frame residential housing Substitution of Plywood by Oriented Strand Board mm lbs (MDI equivalent) Substitution of Phenolic resins by MDI % 27% 28% 31% 32% 34% 35% 37% 38% Higher use of binder per panel unit % 20% 22% 21% 20% 21% 21% Huntsman has the leading market position MDI Total binders MDI share Source: APA / Market Edge 21

22 Financial Performance ($ in Millions) $16,500 $15,000 $13,500 $12,000 $10,500 $9,000 $7,500 $6,000 $7,947 Annual Revenue Annual Adjusted EBITDA (1) $12,740 $11,427 $9,190 ($ in Millions) $2,400 $2,100 $1,800 $1,500 $1,200 $900 $600 $300 $1,655 $1,248 $786 $794 $4,500 $0 PF (2) 2002 PF (2) Q2 05 LTM PF (2) 2002 PF (2) Q2 05 LTM Quarterly Revenue Quarterly Adjusted EBITDA (1) ($ in Millions) ($ in Millions) $600 $3,500 $3,000 $2,500 $2,620 $2,754 $2,935 $3,117 $3,349 $3,340 $500 $400 $300 $225 $289 $330 $405 $490 $430 $200 $2,000 $100 Q1 '04 Q2 '04 Q3 '04 Q4 '04 Q1 '05 Q2 '05 Q1 '04 Q2 '04 Q3 '04 Q4 '04 Q1 '05 Q2 '05 (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 Note historical periods have been adjusted for TDI discontinued operations 22

23 Cyclical Recovery & Growth in Differentiated Adjusted Segment EBITDA ($s in mms) $300 $250 $200 $150 $100 $50 $0 109% Improvement in Differentiated Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Commodity (1) (2) Differentiated (1) Pigments, Polymers and Base Chemicals (2) Polyurethanes, Advanced Materials and Performance Products 23

24 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 70% 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, Aug 05 Run-Rate Objective for 2005 * Fixed Currency Basis

25 Debt Leverage As of Dec. 31, 2004 As of June 30, 2005 Cumulative Multiple of Adj. EBITDA LTM (1) June 30, 2005 Cash & Cash Equivalents $252 $265 Debt Senior Secured Credit Facilities 2,154 1, x Secured Notes Unsecured Notes Subordinated Notes 1,402 1, Discount Notes 958 Other Debt Total Debt $6,300 $4, x Total Net Debt $6,048 $4, x (1) June 30, 2005 Last Twelve Months Adjusted EBITDA of $1,653 million 25

26 Proforma Debt Overview (1) Debt Maturities Callable Debt (2) ($ in millions) ($ in millions) $2,500 $3,000 $2,000 $2,500 $2,000 $1,500 $1,500 $1,000 $1,000 $500 $500 $ Thereafter Huntsman International Huntsman Advanced Materials $ Thereafter Huntsman International Huntsman Advanced Materials 1) Does not include the off balance sheet HI accounts receivable securitization program, which currently has $355 million outstanding. Also, proforma for the following: a) Merger of HI/HLLC on August 16, 2005 b) $50 million voluntary prepayment of HI term loan B on September 19, 2005 c) $75 million voluntary prepayment of Admat floating rate notes on July 15 and September 19 (2) As represented by first date at which debt becomes callable by its terms. 26

27 Credit Overview Credit Statistics (1) ($ in millions) Huntsman Corp Adj. EBITDA (LTM) $1,655 Total Debt TD/EBITDA EBITDA/Int Exp (2) Sr. Implied Rating CCR $4, x 4.2x B1/stable BB-/stable Total Debt TD/EBITDA EBITDA/Int Exp (2) Sr. Implied Rating CCR 90% AdMat Adj. EBITDA (LTM) $184 $ x 5.3x Ba3/stable BB-/stable Huntsman International Pro Forma Adj. EBITDA (LTM) $1,469 Total Debt TD/EBITDA EBITDA/Int Exp (2) Sr. Implied Rating CCR 100% $4, x 4.1x B1/stable BB-/stable 1) Includes the off balance sheet HI accounts receivable securitization program, which currently has $355 million outstanding. Also, proforma for the following: a) Merger of HI/HLLC on August 16, 2005 b) $50 million voluntary prepayment of HI Term Loan B on September 19, 2005 c) $75 million voluntary prepayment of Admat floating rate notes on July 15 and September 19 2) Interest expense represents Q annualized, pro forma for the merger of HI/ HLLC, voluntary debt repayments at HI and AdMat as discussed in footnote one above, plus $14 million of loss on sale of accounts receivable at HI 27

28 Substantial Liquidity Huntsman has $679 million of combined unused revolver availability with $785 million combined liquidity proforma at June 30, 2005 (1) ($ in millions) Cash Revolver Availability Other (2) Total Huntsman International LLC $41 $623 $29 $693 Huntsman Advanced Materials LLC Huntsman Corporation - Consolidated $77 $679 $29 $785 (1) Pro forma for the following: a) Merger of HI/HLLC on August 16, 2005 b) $50 million voluntary prepayment of HI term loan B on September 19, 2005 c) $75 million voluntary prepayment of Admat floating rate notes on July 15 and September 19 (2) Primarily overdraft facilities and unused availability on the HI accounts receivable securitization facility. 28

29 Significant Deleveraging Lower Interest Expense $ $ H'04 Annualized Jun '04 HLLC Sr. Unsecured Jul '04 HI Amend. & Restate Oct '04 HLLC Refin. Dec '04 HI Repricing Dec '04 HI Sub Notes Refi. Feb '05 IPO HI/HLLC Merger LIBOR Change & Other Current Run Rate (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 29

30 Summation Growing differentiated chemicals business Technology and product innovation to capitalize on higher energy costs and tighter environmental standards $200mm cost savings on track Debt reduction of $2bn - Interest reductions of $200mm Consolidation of corporate structure 30

31 Huntsman Corporation Questions and Answers

32 Appendix

33 Adjusted EBITDA Reconciliation $ in millions Q1 '04 Q2 '04 Q3 '04 Q4 '04 Q1 '05 Q2 '05 Net (loss) / income $ (85) $ (185) $ 44 $ (1) $ (56) $ 113 Interest expense - net Income tax expense / (benefit) 5 6 (36) (3) Depreciation and amortization EBITDA Early extinguishment of debt 2 2 (2) Legal and contract settlement expense, net 2 15 (11) Loss on sale of accounts receivable Asset write down Restructuring and plant closing costs Loss from discontinued operations net of tax Adjusted EBITDA $ 225 $ 289 $ 330 $ 405 $ 490 $ 430 Pro Forma (1) Pro Forma (1) LTM Net (loss) $ (167) $ (426) $ (228) $ 99 Interest expense - net Income tax (benefit) / expense (10) 32 (29) 22 Depreciation and amortization EBITDA ,176 Cumulative effect of accounting change (167) Early extinguishment of debt Legal and contract settlement expense, net (9) 8 7 (11) Loss on sale of accounts receivable Asset impairment, write down Restructuring and plant closing costs Reorganization costs Loss from discontinued operations net of tax (9) Adjusted EBITDA $ 786 $ 794 $ 1,248 $ 1,655 (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

34 Segment Adjusted EBITDA Reconciliation $ in millions Q1 '04 Q2 '04 Q3 '04 Q4 '04 Q1 '05 Q2 '05 Adjusted EBITDA Polyurethanes $ 78 $ 119 $ 111 $ 101 $ 190 $ 198 Advanced Materials Performance Products Pigments Polymers Base Chemicals Corporate and other (6) (31) 3 52 (70) (34) Total Segment Adjusted EBITDA(1) $ 225 $ 289 $ 330 $ 405 $ 490 $ 430 $ in millions Pro Forma (2) Pro Forma (2) LTM Adjusted EBITDA Polyurethanes $ 357 $ 264 $ 409 $ 600 Advanced Materials Performance Products Pigments Polymers Base Chemicals Corporate and other (29) (49) Total Segment Adjusted EBITDA(1) $ 786 $ 794 $ 1,248 $ 1,655 (1) For a reconcilation of Total Segment Adjusted EBITDA to Net Income see page 27. (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