Huntsman posts stable results in Q3

07 Nov '08

6 min read

The decrease in EBITDA in the Materials and Effects segment was primarily due to higher raw material costs and energy costs. In addition, fixed costs and selling, general and administrative costs for textile effects were higher, primarily due to the strength of the Euro and Swiss franc relative to the U.S. dollar.

The advanced materials business contributed $41.7 million of EBITDA for the three months ended September 30, 2008, while the textile effects business contributed $4.5 million. During the three months ended September 30, 2008 the Materials and Effects segment recorded restructuring, impairment and plant closing costs of $1.5 million in textile effects compared to $4.2 million for the same period in 2007.

Performance Products:
The increase in revenues in the Performance Products segment for the three months ended September 30, 2008 compared to the same period in 2007 was primarily due to a 34% increase in average selling prices. Average selling prices increased from price increase initiatives in response to higher raw material costs and the strength of major European and Australian currencies against the U.S. dollar.

Sales volumes (excluding tolling), decreased 8% primarily due to the conversion of most of our ethylene glycol business to a toll manufacturing operation in 2008 and lower surfactant sales that more than offset volume increases in other products. Toll manufacturing volumes were higher in the 2008 period.

The increase in EBITDA in the Performance Products segment was primarily due to higher average selling prices which were partially offset by higher raw material and energy costs. Higher margins were partially offset by higher fixed production costs and selling, general and administrative costs due in part to the strength of major European and Australian currencies against the U.S. dollar.

We estimate the financial impact including unabsorbed costs, repairs and lost profit margin of hurricanes Gustav and Ike at approximately $9 million in the third quarter of 2008 in our Performance Products division.

Pigments:
The increase in revenues in the Pigments segment for the three months ended September 30, 2008 compared to the same period in 2007 was primarily due to a 17% increase in average selling prices partially offset by a decrease in volumes. Average selling prices increased primarily due to price increase initiatives and the strength of the Euro versus the U.S. dollar, local currency selling prices were higher in all regions of the world. Volumes decreased primarily due to lower demand in Europe.

The increase in EBITDA in the Pigments segment was primarily due to the higher local currency selling prices discussed above, partially offset by higher raw material energy and freight costs. In addition, indirect costs and selling, general and administrative costs were lower due to ongoing cost savings initiatives offset by the foreign currency translation effect of a stronger Euro versus the U.S. dollar.

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