Huntsman Corporation. Citigroup 16 th Annual Chemical Conference December 2005

Transcription

1 Huntsman Corporation Citigroup 16 th Annual Chemical Conference December 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 Business Overview Peter Huntsman

4 Huntsman Growth Story Revenue ($ in Billions) $12 $10 $8 $6 $4 $2 Compounded Annual Growth Rate: ~24% Shell PP American Hoechst Monsanto MAn/LAB Nova Styrenics Sale Packaging Spinoff Rexene Texaco PO/MTBE Texaco Chemical Dow Ethyleneamines and Rhodia Surfactants ICI Vantico $ Q3 '05 LTM 2005 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) : $12.9 billion LTM Adjusted EBITDA (2) : $1.64 billion Base Chemicals 28% Polyurethanes 26% Polymers 9% Base Chemicals 20% Polyurethanes 39% Polymers 13% Pigments 8% Performance Products 16% Advanced Materials 9% Differentiated Pigments 9% Performance Products 13% Advanced Materials 10% 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 Pigments LTM Revenue: $1.0 Billion; 9% of LTM Adjusted EBITDA End Markets Paper 1% Inks 6% Others 3% Plastics 31% Coatings 59% TiO 2 U.S. Price and Global Utilization Rate Global Market Participants US Price ($ / MT) $2,500 $2,000 $1,500 $1, US Price ($/MT) Global Operating Rate 2007E 2006E 2005E 99% 95% 91% 87% 83% 79% 75% 8 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 2003

9 Pigments Improved Industry Dynamics Dynamics Ti02 Cycle Industry demand grows at 2 3% over time 5,000 4,500 CAGR 2-3% 20% 15% Year-over-year demand can be volatile, ( 04 +7%, YTD 05-6%) 4,000 10% Improved fundamentals Dupont DeLisle, Miss. outage Lower inventories All major producers have announced price increases of $150/mt Global Demand / ktpa 3,500 3,000 2,500 2,000 1,500 5% 0% -5% -10% -15% 1, YOY Change in Demand % yoy Change Demand 9 Source: Management estimates

10 Base Chemicals LTM Revenue: $3.6 Billion; 20% 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% Cyclohexane Butadiene ,355 1,125 Benzene 6% Benzene Paraxylene , , Butadiene 7% Cyclohexane 14% Propylene 14% 73% Flexible Capacity for Ethylene $175 $150 Regional Segment EBITDA ($ in Millions) Naphtha (US$/MT) $600 European Costs, Pricing W. European Ethylene Contract Price (US$/MT) $1,000 $125 $100 $500 $900 $75 $50 $400 $800 $25 $0 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 $300 J-04 A-04 J-04 O-04 J-05 A-05 J-05 O-05 $700 Europe North America Naphtha W. Europe Ethylene Price Source: CMAI 10

11 Performance Products LTM Revenue: $2.0 Billion; 13% of LTM Adjusted EBITDA Revenue Split by Business Units EBITDA (1) Split by Business Units Maleic & Licensing 6% Performance Specialties 29% Performance Specialties 30% Maleic & Licensing 28% Performance Intermediates 65% Performance Intermediates 42% (1) YTD September 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 11

12 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 12

13 Advanced Materials LTM Revenue: $1.2 Billion; 10% of LTM Adjusted EBITDA Base Raw Material Commodity Intermediates Building Blocks Formulations Chlorine Propylene Phenol Acetone Epichlorohydrin Bis-Phenol A Base resins Cross-linking agents; matting and curing agents liquid and solid; reactive diluents specialty resins products, epoxy, polyurethanes and silicone based formulations Commodity The Epoxy Resin Value Chain Specialty *Epichlorohydrin and Bis-Phenol A represent less than 25% of Advanced Material s total raw material costs. *Advanced Materials derives less than 25% of its revenue from base liquid and solid resins. 13

14 Advanced Materials Business Overview Business Overview Coatings, Construction Coatings and Adhesives (53% of Revenues) Design and Composite Coatings Engineering (26% of Revenues) Power and Electronics (21% of Revenues) 14

15 Advanced Materials Coatings, Construction and 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) 15

16 Advanced Materials Design and Composite Engineering resin + carbon fiber 16

17 Advanced Materials Design and Composite Engineering 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 17

18 Advanced Materials Power and Electronics 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 18

19 Polyurethanes LTM Revenue: $3.4 Billion; 39% 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% 19

20 Polyurethanes Global MDI Market Global MDI Demand Global MDI Cash Cost Curve 3,500 Thousands of Metric Tons 3,000 2,500 2,000 1,500 1, CAGR = 7.4% US W. Europe Asia ROW 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 Source: Nexant

21 Polyurethanes 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 21 Construction Renovation

22 Polyurethanes 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

23 Polyurethanes Insulation Applications Domestic Pitched roof insulation Commercial Boiler insulant External finishing insulation system Cavity wall insulation Ground floor insulation Internal wall dry lining 23 Roof and wall panels Refrigeration

24 Polyurethanes Composite Wood 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 24

25 Polyurethanes Composite Wood Applications Pitched roof sarking OSB 25

26 Polyurethanes Automotive MDI Applications Seating Comfort Thinner seats Faster processing Acoustic Elements Acoustic tuning Weight reduction Lower emissions Self-adhesive to substrate Steering Wheels Water & Pentane blown Cycle time/productivity Composites Part integration Cost, weight, performance Productivity Interior Trim Feel Aesthetics Weight/VOCs Single material composite Vibration Control Durability Lower cost Weight savings Run Flat Tires Safety Performance 26

27 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 100% 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, Sept. 05 Run-Rate Objective for 2005 * Fixed Currency Basis

28 Financial Review Kimo Esplin

29 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 Financial Performance ($ in Millions) $6,417 Annual Revenue Annual Adjusted EBITDA (1) $9,190 $11,426 Quarterly Revenue $12, LTM 9/30/05 $3,349 $3,340 $3,117 $3,122 $2,935 $2,621 $2,754 Differentiated Commodity Corp/Other Includes $27mm hurricane impact and $32mm PO/MTBE outage $1,800 $1,550 $1,300 $1,050 $800 $550 $300 $50 -$200 $500 $350 $200 $786 $794 $1,248 $1, LTM 9/30/05 Quarterly Adjusted EBITDA (1) $225 $289 $330 $405 $490 $430 $319 $1,000 $500 $50 $0 -$100 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q205 Q305 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q205 Q305 (1) Adjusted EBITDA excludes restructuring and plant closing costs, loss on the sale of accounts receivables and other unusual items. 29

30 Hurricane and PO/MTBE Overview Third Quarter Fourth Quarter Estimate Very little physical damage to Huntsman facilities All primary units resumed production by early November Estimated Financial impact PO/MTBE $32 million of Adjusted EBITDA; Hurricanes $27 million of Adjusted EBITDA Performance Products $10mm Base Chemicals $12mm Polyurethanes $4mm Pigments $1mm Hurricanes $130 million of Adjusted EBITDA $53mm for repairs and $77mm for lost production Base Chemicals $58mm Performance Products $44mm Polyurethanes $23mm Pigments $5mm = Huntsman Facilities 30

31 Organizational Structure Continued Simplification Pre IPO Current Proposed Merger Huntsman Holdings Huntsman Corp Huntsman Corp HGI 90% 100% 100% Preferred Stock 12% Warrants AdMat HI HI Bank Debt Bonds HMP Bonds Sr. Sub Discount Notes Bank Debt Bonds Bank Debt Bonds 90% 100% 40% AdMat HLLC 60% HIH Bank Debt Bonds Bank Debt Bonds HI Bonds Bank Debt Bonds 31

32 Cycle Average Adjusted EBITDA Future Value Drivers Adjusted EBITDA (4) ($ in Millions) Coronado cost reduction program Commodity(1) Differentiated(2) Corporate Overhead(3) $2,000 Chinese MDI joint venture operation (mid 2006) $1,000 Wilton, UK 900mm lb LDPE facility complete (late 2007) (1) Base Chemicals, Polymers, Pigments (2) Polyurethanes, Advanced Materials, Performance Products (3) Q annualized excluding foreign currency translation 32 $ Q LTM Q LTM Q LTM (4) Estimated Adjusted EBITDA excludes restructuring and plant closing costs, loss on the sale of accounts receivables, discontinued operations and other unusual items. As restated, it is also adjusted for plant closures, divestitures, acquisitions, restructuring savings. Q Annualized (ex. F/X)

33 2005 Progress Update Deleverage 2005 Objectives Progress Update Planned $1.4 billion IPO, proceeds to reduce indebtedness Reduce debt post IPO by $2 billion by end of 2007 Cost Reduction Project Coronado Simplify organization structure Reduce the number of independently financed operating subsidiaries Earnings Capitalize on improving chemical cycle upswing Completed $1.6 billion IPO on February 16 th; ~$4.2 billion market capitalization Excluding debt repaid by IPO proceeds, have voluntarily paid down nearly ~$475 million since December 2004 to date On schedule to achieve $200 million cost saving goal by year-end 2005 Proposed merger of AdMat into HI will reduce reporting entities to 2 (HC and HI) compared to 5 one year ago; all borrowings will be consolidated at HI Q3 05 LTM Adjusted EBITDA of $1,644 million versus 2004 Adjusted EBITDA of $1,248 million 33

34 Huntsman Corporation Questions and Answers

35 Appendix

36 September 30, 2005 Capitalization Current Multiple of ($ in millions) 9/30/05 (1) LTM EBITDA (2) Cash (3) $162 - HI: HI Revolving Facility HI term B loan 1, x Senior secured notes x Senior unsecured notes x Senior subordinate notes 1, x Other x Admat: Revolving Facility AdMat notes (3) x Other AdMat debt 4 0.0x Total debt $4, x Total net debt 4, x LTM Adj. EBITDA / Net Interest Expense 4.2x (LTM Adj. EBITDA-CapEx) / Net Interest Expense 3.5x (1) Excludes $288 million of off-balance sheet financing obtained under the accounts receivable securitization program. (2) September 30, 2005 LTM EBITDA of $1,644 million. (3) Current 9/30/05 is pro forma for redemption of the remaining $25 million senior secured floating rate notes due 2008, anticipated to be completed on December 12,

37 Adjusted EBITDA Reconciliation $ in millions Q1 '04 Q2 '04 Q3 '04 Q4 '04 Q1 '05 Q2 '05 Q3 '05 Net (loss) / income $ (85) $ (185) $ 44 $ (1) $ (56) $ 113 $ (30) 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 $ 319 Pro Forma (1) Pro Forma (1) LTM Net (loss) $ (167) $ (426) $ (228) $ 25 Interest expense - net Income tax (benefit) / expense (10) 32 (29) 65 Depreciation and amortization EBITDA ,085 Cumulative effect of accounting change (167) Early extinguishment of debt Legal and contract settlement expense, net (9) 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 $ 1,644 (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

38 Segment Adjusted EBITDA Reconciliation $ in millions Q1 '04 Q2 '04 Q3 '04 Q4 '04 Q1 '05 Q2 '05 Q3 '05 Adjusted EBITDA Polyurethanes $ 78 $ 119 $ 111 $ 101 $ 190 $ 198 $ 195 Advanced Materials Performance Products Pigments Polymers Base Chemicals Corporate and other (6) (31) (3) 48 (70) (34) (39) Total Segment Adjusted EBITDA (1) $ 225 $ 289 $ 330 $ 405 $ 490 $ 430 $ 319 $ in millions Pro Forma (2) Pro Forma (2) LTM Adjusted EBITDA Polyurethanes $ 357 $ 264 $ 409 $ 684 Advanced Materials Performance Products Pigments Polymers Base Chemicals Corporate and other (29) 56 7 (96) Total Segment Adjusted EBITDA (1) $ 786 $ 794 $ 1,248 $ 1,644 (1) For a reconcilation of Total Segment Adjusted EBITDA to Net Income see previous page. (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