Huntsman boasts $569 million of cash flow, pays $200 million of debt

By Devika Patel

Knoxville, Tenn., Oct. 28 – Huntsman Corp. met its objective of generating over $350 million in free cash flow – the company reported $569 million of pre-dividend free cash flow – and it put the surplus money to work by paying off $200 million of loan debt.

“Our objective was the delivery of more than $350 million of pre-dividend free cash flow for the entire year of 2016,” president, director and chief executive officer Peter Huntsman said on the company’s third quarter earnings call on Friday. “To this end, we’re generating substantial amounts of free cash flow and are putting it to use by prepaying our debt.

“To date, we’ve generated over $550 million of free cash flow, made debt payments of more than $250 million, including $200 million which were early prepayments, and strengthened our balance sheet.

Executive vice president and chief financial officer J. Kimo Esplin echoed the CEO’s comments, noting that the company plans to grow its EBITDA and lower costs.

“This year we set a goal to generate more than $350 million of free cash flow. As of the end of the third quarter, we have exceeded that goal by producing $569 million of free cash flow year to date.

“As we look forward to 2017, we expect to continue our strong free cash flow generation, most notably through growth in EBITDA, stable working capital, as well as lower capital expenditures and restructuring payments.”

He added that the company made early payments on its term loan B of $100 million on July 22 and again on Sept. 30.

While the company may have delivered on its goal of raising extra capital and prepaying debt, it doesn’t see the large working capital numbers to continue into the next year.

“If you look at Huntsman, together, as a consolidated entity relative to 2016, I think we’re not going to have the same working capital benefits in 2017 that we had in ’16” Huntsman said.

“I think we’re still going to have substantial free cash flow, but it won’t be the mid-$500 million level that we’re at today because of working capital,” Huntsman added.

The company also seeks to spinoff a new company next year comprised of its titanium dioxide chemical business, which will boost debt repayments for the parent company.

“[The new company] will be modestly capitalized and there will be some modest amount of debt [for the company], bonds and bank, and Huntsman Corp. will receive that dividend back,” Esplin said.

“In addition, we will have a retained interest [in the new company] and we are asking the IRS for the opportunity to have a greater than 20% interest in [the new company], upwards of 40%, and the use of proceeds as we divest of that retained interest will be used to continue to pay down debt at Huntsman Corp.,” Esplin added.

Highlights

At the end of the quarter, the company had liquidity of $1.25 billion. This is an increase of $224 million from the end of 2015.

Net income was $64 million compared to $63 million in the prior year period and $94 million in the prior quarter.

Adjusted EBITDA was $272 million compared to $311 million in the prior year period and $325 million in the prior quarter.

Diluted income per share was $0.23 compared to $0.22 in the prior year period and $0.36 in the prior quarter.

Adjusted diluted income per share was $0.38 compared to $0.47 in the prior year period and $0.53 in the prior quarter.

Net cash provided by operating activities was $405 million. Free cash flow generation was $300 million.

Huntsman is a specialty chemicals manufacturer based in the Woodlands, Texas.

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