Huntsman Corporation (NYSE:HUN) Third Quarter 2022 Results Conference Call November 4, 2022 8:00 AMm. ET
Participating companies
Ivan Marcuse – Vice President of Investor Relations
Peter Huntsman – President, President and Chief Executive Officer
Phil Lister, Executive Vice President and Chief Financial Officer
Conference Call Participants
Josh Spector – UBS
Kevin McCarthy – Vertical Research Partners
Aleksey Efremov – KeyBanc
John Roberts – Credit Suisse
Frank Mitsch – Research
David Begleiter – Deutsche Bank
Andres Castillo – Morgan Stanley
Mike Little Bustard – Wells Fargo
Matthew Blair – TPH
Matthew DeYoe – Bank of America
Laurence Alexandre – Jefferies
Operator
Good morning and welcome to Huntsman Corporation’s third quarter 2022 earnings call. [Operator Instructions] As a reminder, this convention is being recorded lately.
I am now pleased to greet your host, Ivan Marcuse, Vice President of Investor Relations. Go ahead, Ivan.
Ivan Marcus
Welcome to Huntsman’s second quarter 2022 third quarter earnings call. Joining us today on call are Peter Huntsman, president, CEO and president; Phil Lister, Executive Vice President and Chief Financial Officer. This morning, before the market opened, we published our Q22 effects in a press release and published them on our online page, huntsman. com. We also posted a series of slides on our online page. page that we will use in this morning’s call when we present our effects. As a reminder, following the announcement of the sale of our Textile Effects business, we now treat Textile Effects as discontinued operations in our source of income statements and cash flows and hold them for sale on the balance sheet. You can locate all the applicable main points in our 10-Q that will be filed with the SEC.
During the call, we would possibly make statements about our long-term projections or expectations. All such statements are forward-looking statements. And while they reflect our existing expectations, they involve dangers and uncertainties and are not promises of long-term performance. Please refer to our SEC filings for more information on points that may also cause actual effects to differ materially from such projections or expectations. We do not plan to publicly update or revise any forward-looking statements. We will also refer to non-GAAP monetary measures, such as adjusted EBITDA, source of adjusted net income and loose cash flow. You can locate reconciliations to the directly comparable GAAP monetary maximum. Measured in our earnings release that was posted on our website, huntsman. com.
Now I’ll pass the call on to Peter Huntsman.
Pierre hunter
Thank you Ivan. Welcome everyone. Thank you for us this morning.
Let’s move on to slide 5. Adjusted EBITDA for our Polyurethane department in the third quarter was $138 million. Overall, sales volumes in the quarter decreased by 16%, with Europe accounting for more than a portion of the decline, the Americas approximately 35%. , followed by China up to around 10%. These declines were due to a combination of reduced stocks in the supply chain and decreased demand. Obviously, Europe is in a recessionary economic environment that could potentially worsen in the coming months due, in large part, to higher and volatile energy and grass-based fuel prices.
In Europe, charges for herbal fuel have moderated since last August’s peak, but remain at traditionally higher levels. And in the future, the charges will remain particularly higher than in the United States. in Europe for the foreseeable future. As we discussed in our last call for results, we gain advantages of 60% of our herbal fuel production costs at our nitrobenzene and aniline facilities, or in the UK, where herbal fuel costs were reduced this year compared to continental Europe. Despite this charge advantage, our profitability has been particularly impacted in Europe and we will want to reduce our charge design in the region to generate appropriate returns.
In the long term in Europe, regardless of the existing recessionary environment, we expect to be a major beneficiary of energy-saving initiatives. The world and Europe, in particular, want higher degrees of insulation to reduce energy consumption. We remain well placed to provide responses to residential and non-residential markets. Demand in China continues to be affected by a weaker overall economic expansion as the government imposes a 0 COVID policy and the effect it has on its economy, as well as weaker structural activity. Improvements around the COVID scenario and an economic recovery imaginable to move the economy in the right direction would be a catalyst for our business to improve in the region. Lower propylene oxide margins in China led to a decline in equity gains year-over-year.
Our joint venture generated approximately $18 million in equity gains for the quarter, down from $32 million reported a year ago. Given the existing margin grades on the acquisition orders, we expect equity gains to be approximately $70 million decrease in 2022 compared to record earnings in 2021. The effect of rapidly emerging interest rates in the U. S. As the Federal Reserve struggles with higher inflation it is having a real effect on residential structure markets. We see this obviously in our OSB, foam spray and furniture businesses.
HBS, our aerosol foam insulation business, experienced a 22% year-over-year decline in earnings due to stock clearance in the quarter. A transparent headwind in the future. Due to the slowdown in demand and our expectation that this environment will continue for at least the next few months, we are taking rapid short- and long-term action to address those challenges. I will make additional comments in my closing remarks, but suffice it to say that we will further reduce the prices of our polyurethane operations in the future.
In the short term, in polyurethanes, we have adapted our MDI production to demand. It will do 2 things. On the plus side, this will help us manage our stocks and fees, as our focus on making money is a more sensible priority. However, the reduction in production will have a negative effect on our absorption of constant and expected tariffs. The positive has the effect of minimizing benzene fees on our revenue stream. In addition, we are aggressively moving forward on the rate relief plans we discussed last quarter and are in the process of implementation, which come with the existing exit from certain regions. that are not generating appropriate returns like Brazil. And we also continue to consolidate some back-office functions. Our automotive polyurethanes platform recorded an 18% year-on-year improvement in volumes.
In a recessionary environment, we have a well-positioned automotive business for the next few years. Looking ahead to the fourth quarter, we expect Europe to generate losses. We expect a further reduction in stocks in the United States. Unidos. La economy in China turns out to be silenced. As a result, seasonality will be much more pronounced this year due to all the headwinds that will affect demand and costs. As we sit here today, we expect polyurethane-adjusted EBITDA for the fourth quarter to be between $55 million and $85 million and margins below 10% due to European market conditions.
Let’s move on to the slide 6. La performance profit reported adjusted EBITDA of $110 million for the current quarter, up 7% from the third quarter of last year. Adjusted EBITDA margin for the quarter remained strong at 25%. The momentum of the functionality products sector has become more challenging in the quarter as demanding situations increased in Europe and China. Demand in Europe fell significantly by 23% as maleic volumes came under pressure. However, even with those demanding macro situations, we were able to generate margins at the higher end of our expected long-term range. The outperformance is largely due to the strength of our U. S. market, our advertising excellence program, and the industry dynamics we’ve reported over the past year, as well as effective load control.
Our North American maleic anhydride business, which covers spaces such as non-residential structure and our global ethylene amine business, which focuses on the fuels and lubricants markets, remains our active business in this division. Our capital investments in differentiated polyurethane catalysts and chemicals for the electric vehicle, semiconductor and insulation markets continue to progress as planned. As we have indicated in the past, assuming strong macroeconomic conditions, we expect those projects to start in 2023 and generate more than $35 million in EBITDA profits in 2024. Performance Products are still a very hot business and we continue to compare strategic bio-based investments. Develop this activity in the long term.
The fourth quarter is the weakest seasonal quarter in this division. We expect this year to arrive with weaker demand in Europe and above-average visitor reduction in the US. U. S. As a result, we expect adjusted EBITDA for the fourth quarter. functionality products to be in diversity from $60 million to $80 million with a margin of about 20%.
Returning to slide number 7, Advanced Materials reported adjusted EBITDA of $58 million in the quarter, an increase of 21% over the third quarter of last year. We generated strong returns during the quarter despite the slowdown in the global economy. Volumes fell 16%, partly due to our resolution earlier in the year to deselect the low-margin raw curtain businesses and partly due to declining demand in certain coatings commercial markets. Improved volumes in higher-margin products, synergies from recent acquisitions and tight charge control contributed to the improvement in adjusted EBITDA. We, the business, continue to outperform many of our commercial adhesive markets as we provide answers to our customers. Despite some of the near-term headwinds, our commercial adhesives portfolio is well placed to grow in the coming years. In addition, we experienced modest expansion in our aerospace and automotive markets compared to the third quarter of last year.
Our aerospace volumes and margins are halfway to pre-pandemic levels, despite commodity headwinds. We believe aerospace fundamentals continue to improve and expect business activity to fully recover as widebody aircraft production rates increase. in the coming years. In the medium term, we expect the aerospace industry to continue to recover, the automotive sector to benefit from higher rates of its fabrics in electric cars compared to classic combustion engine cars, and projected constructions in infrastructure costs. Like our other businesses, we expect seasonality, in addition to weaker overall demand and currency headwinds, to have an effect in the fourth quarter. We expect fourth quarter adjusted EBITDA to be between $40 million and $45 million.
With that, I’ll talk for a few minutes with our CFO, Phil Lister.
Phillister
Thank you, Peter.
Let’s move on to slide 8. Adjusted EBITDA for the third quarter $271 million, a low of $78 million or 22% compared to the third quarter of 2021. Sequentially, adjusted EBITDA decreased to $139 million or 34%. The relief in adjusted EBITDA is due to our European polyurethane business breaking even in the third quarter due to high energy prices and minimized demand. Adjusted EBITDA margins for advanced materials and performance products remained strong at 18% and 25%, respectively. Polyurethane adjusted EBITDA margins were reduced to 11% in the third quarter, leading to an overall EBITDA margin point of 13% for the company. Our European polyurethane business reduced the company’s overall margins by 3%.
Sales volumes decreased by 15% in the quarter, by 23% in Europe, by 14% in the Americas and by 7% in Asia, due to the deteriorating macroeconomic situation, particularly in Europe and structured end markets in general. Gross margin increased to $48 million with earnings of $339 million, representing a 15% year-over-year increase, offsetting the $291 million increase in sales. of our maximum energy-intensive production process, MDI, we report that every $1 consistent with the MMBtu movement in Europe equates to approximately $10 million at normalized production levels. We handle production rates in Rotterdam at around 50%. And at those levels, the effect of each dollar according to MMBtu is about $5 million to $6 million in adjusted EBITDA.
Some other commodities, notably benzene, have fallen from record charges seen at the start of the third quarter, although charges remain high, while other commodities continue to rise, such as ammonia, chlorine and caustic soda. As a reminder, when reviewing the impacts of charges, we represent more than 90% of our stock using the weighted average loading method. On a weighted average basis, it usually takes about 3 months to cover most loads. With slower sales and better herbal fuel rates in Europe in August and September, we will continue to see top inventory charges disappear in the fourth quarter.
On the equity side, we reduced our global equity volumes by approximately 10% in the third quarter and expect a further 10% decline in the fourth quarter to align with the decline in economic activity. Sg
Let’s move on to slide 9. Our synergy and load optimization program is still underway. At the end of the third quarter, we learned an annualized run rate of $160 million in savings. Excluding our new European restructuring initiative, we expect to meet or exceed our target of $170 million in savings by the end of 2022 and $240 million by the end of 2023.
During the quarter, we made progress in hiring our new global business centers in Costa Rica and Poland. We expect to be fully operational at those sites by 2023. Additionally, as part of our help desk model, we announced that it would move quantities of our internal IT to a service provider controlled by a third component. We are making progress on the geographical launches announced in the past in polyurethanes. And in Advanced Materials, we announced the closure of our Maple Shade, New Jersey plant, which was a component of our 2020 HVAC acquisition. For our $240 million program, we will be expecting about $65 million in money prices in 2022 and will be expecting about $70 million in money prices next year while we look at layoffs and restructuring.
With regard to the European restructuring allocation that we are announcing today, we have informed the relevant works councils that we intend to consult them on our prices leaving a secure announcement and R
Cash from ongoing constant transactions in the quarter was $285 million, compared to $179 million a year earlier in the same period. A year ago. To date, our loose money from consistent transactions was $409 million. Over the past 12 months, total loose money was approximately $1. 1 billion and we returned approximately $1 billion to shareholders in the form of repurchases and dividends consistent with percentage. Share buybacks for the quarter amounted to $250 million, bringing the year-to-date total to $752 million. Profit consistent with the consistent percentage for the quarter was $0. 71 consistent with the consistent percentage, compared to $1. 02 a year ago.
Capital expenditures are in line with our plan of approximately $300 million in expenses in 2022, adding $280 million of ongoing operations. We are now focusing on our investments in functionality products for electric vehicles, semiconductors and insulation catalysts. Our adjusted tax rate for the quarter is 21% and our long-term diversity from 22% to 24% remains unchanged. At the end of September, we had just under $2 billion in liquidity. Our net senior notes mature in 2025 for approximately $300 million. And beyond that period, we have deadlines in 2029 and 2031. Our balance sheet is solid at 0. 7x with leverage on adjusted EBITDA minus 12 months and we remain fully committed to our quality rating.
Upon completion of the agreement to sell our textile business, we expect to obtain approximately $540 million after tax in cash before any adjustment to the end of net operating capital. I would also like to point out that our desired capital of approximately $80 million that we announced at the time of signing has been syndicated and that the Textile Effects transaction is now a money transaction for Huntsman.
Peter, come in yourself.
Pierre Chasseur
Fil, thank you very much. Over the past 12 months, the global economy has weathered a series of shocks and unforeseen events. These come with the highest inflation in 40 years and related consumer reaction. eliminated from global markets and unprecedented energy volatility with supply chain challenges.
In light of those events, it is worth examining what is under our control and how we react to events beyond our control. First, we announce today in Europe a restructuring founded in Europe that will eliminate at least $40 million from our European operations. I believe it will be some time before Europe fully recovers the pieces of its failed energy policies. However, I believe that any new general will rely on fuel plus transportation to meet their needs, where Russian fuel materials to Europe are sometimes sold at a very low price. Premium to U. S. prices, I that Europe will now rank competing with Korea, China and Japan to call a few for fuel imports.
If I take a look at the last decade, the fuel has been sold in those export markets at a premium of about $5 consistent with MMBtu over former fuel charges in Europe and North America. If Europe has a $5 fuel load consistent with MMBtu for freight, it will charge Hunt to spend about $40 million to $50 million a year. This is our initial purpose of reducing charges.
Today we announce the closure of 2 of our divisional headquarters and a series of projects that will permanently eliminate a $40 million surplus from our European operations. Let me be clear. This is not a renunciation of one of our $2 billion European commitments, but a recalibration of a business based on the realities of costs, visitors, investor expectations and having a business built around visitor demands that will provide long-term expansion and opportunity. This will be in addition to the $240 million we announced at last year’s Investor Day presentation.
We also announced that our commitment to invest $80 million in similar actions in the sale of our Textile Effects business has been replaced. At a time when so many deals are withdrawn or cannot be concluded, this says a lot about the quality of this deal and SK and Huntsman’s ability to finalize what we started. We expect this transaction to close in the coming months.
A year ago, we committed to a $240 million charge-saving business restructuring plan when we introduced it on Investor Day. And to date, we achieved an execution rate of $160 million and are on track to finish by the end of 2023. We announced this quarter the acquisition of $250 million in stock and remain on track to succeed in $1 billion in stock. Through the end of the third quarter on an LTM basis, we generated $1. 4 billion in adjusted EBITDA and a margin of 16. 5%.
There are many variables between now and the end of the year, however, we expect loose money of around 40%. We will end the year with a strong balance sheet that will be further strengthened by the divestment of our Textile Effects business. We ended up using our balance sheet to continue returning money to shareholders through a competitive end of division, percentage buybacks, M&A opportunities, and reinvestments in our business. As we look for opportunities to deploy capital, we will be very wise.
Now let’s take a look at the murky waters of the fourth quarter and 2023, as we see a slowdown in markets in the US. The U. S. is in the U. S. around the residential structure, as well as a continued slowness in China around ongoing COVID prevention policies. Our most demanding situations are in Europe. We will see 2 variables that will be serious headwinds or that possibly provide us with better benefits than expected.
The first of these is energy. As we have said in the past, every dollar of movement consistent with MMBtu of fuel charges from our European nations represents a charge of about $10 million per year based on usage rates. We expect an increase consistent with the value of fuel in our The fourth quarter diversity we shared with you earlier in this call is what we see today. If stocks stay where they’ve been so far this month, we’ll see some benefits. If the values succeed at the levels we saw at the end of the summer, there will be headwinds. Regardless, we will continue to drive values and margins where we can.
The moment variable is how customers manage stock. To what extent is our decrease in demand due to our customers’ stocks?That part is stock and deserves to be resolved until the end of the year or early 2023. In all cases, we use our services to meet our own current capital targets and the wishes of our clients. We also complement some of our production desires. with imports from outside Europe.
Our immediate priority remains the achievement of our operational and restructuring objectives. Continue to work with our consumers to understand their long-term desires and ensure our costs and margins match what the market will support. Until 2023, the worst mistake we can make is waiting for situations to resolve themselves. We will be aggressive. We will do everything we can as temporarily as possible to return to the profitability and returns that our investors and our corporate desires deserve to get our European business back to where it belongs.
Throughout 2023, the U. S. will be able to The U. S. will start to reduce inflation and I think we’re starting to see China recover by refocusing more on economic growth. Europe will begin to stabilize and there will be winning industries and others that move or leave. Take the right steps to make sure we can take credit for any of those innovations as markets move forward.
Operator, with this, we have concluded our comments ready and will open the queue for any response session.
Q&A session
Operator
[Operator Instructions] The first comes from Josh Spector of UBS.
Josh Spector
I know it’s hard to answer, but I guess if you look at the sequential motion, from Q3 to Q4, you’ve talked about that before, but if you were to fill or put in larger buckets the energy load, the stock reduction, the base volume decreases, the constant load leverage, what would be the cubes so we can start thinking about what an overall rate would look like when it beats some of the worst?
Pierre hunter
That’s a very smart question. I think it will vary from one industry sector to another. For example, I think where you keep seeing strong expansion like automotive and aerospace, there isn’t a lot of stock right now. Those industries are only looking to absorb the prices of raw curtains and pull them through. In other spaces, in fact, like what we see in construction fabrics, etc. And some of those spaces that are similar to construction, furniture, insulation, etc. We’re seeing a stock market correction that would, in fact, make those industries and businesses worse than they normally would be at a normalized pace. It is probably the maximum similar to stock adjustments.
Again, I must emphasize that this is a fluid number, as it will vary from sector to sector or consumer to consumer. But as I said in my comments, I believe that until the end of this year, early next year, the maximum of this stock will be exhausted from the chain of origin. I would also like to point out that as market position situations slow down, it becomes at best a self-fulfilling prophecy to extinguish this cycle as market position situations slow down and demand slowdown, this stock relief only takes longer to achieve. So the benefits we would have expected to make from the drop in commodity costs a month or two later will come later than expected and inventories that we expect to have depleted by the end of the quarter will move into next year due to declining demand. Again, excuse me for being a bit murky, but it’s a pretty fluffy scenario that we’re seeing right now.
Phillister
Josh, just a few more knowledge problems for you. So, FX year over year, we expect with existing rates that we will see a negative effect of approximately $15 million year-over-year. And then he commented on underabsorption rates given the efforts we’re making to align inventories in end markets, it can have a negative effect of about $15 million to $20 million between the third and fourth quarters compared to what we’re looking to achieve through matching production to the final market situation.
Operator
Next comes from Kevin McCarthy of Vertical Research Partners.
Kevin McCarthy
Peter, can you tell us about your active footprint in polyurethanes? I think last quarter you announced paintings that you’re doing in Brazil. Do you see prospects to continue this rationalization in markets such as Asia?
Pierre hunter
Yes, we are looking in parts of Southeast Asia. Without going into too much detail, some of those amenities that we are looking for in the end and others that we are looking for in the promotion or maybe giving the opportunity to sell a facility to a society or something like that. So, again, some of them are happening right now. But having said that, I believe, again, in the long term, where we need to see our volume concentrated or in markets where we’re going to see a pricing strategy rather than a volume strategy. This means that we will look for markets where we can move the production that leaves our separators. We can move high-end, less volatile and higher margin material products. And it’s not something that’s going to happen overnight, but it’s a transition and a commitment of 2 or 3 years.
And I think we’re probably 0. 33 halfway. So, it’s a mix of how temporarily we can shut down assets and move them in an orderly manner and how temporarily we can reabsorb that tonnage into new programs and into eligible programs. So it’s not just about moving the product instantly. In many cases, we have to go through a qualification process. It would take several months.
Operator
Next comes from Aleksey Yefremov of KeyBanc.
Alexeï Efremov
In functionality products, it turns out that we expect lower volumes, but margins remain largely stable. You don’t see significant propagation compression at this point. I just tried to make sure it’s accurate.
Pierre hunter
Well, again, times are tight right now, but I think our margin field in our price field has been strong so far. In many of those products, we are 1 in 2, maybe 3, global players on a global scale. sometimes I don’t see fabrics and direct costs putting much pressure on costs. So I expect this tariff field to continue. But I think the most important thing for functionality products in the fourth quarter and early next year is going to be volume rather than margin.
Operator
The next one comes from John Roberts of Credit Suisse.
Jean Roberts
How does the charging procedure work on the new separator?And is the slowdown in the economy going to delay your ability to carry that?
Pierre hunter
Well, again, I think the biggest product we’re getting out of this department is in the automotive sector. And it’s still a very smart domain for us right now. We also see that a lot of foam will come out flexible. de this separator and that, again, it has residential and automotive applications. But again, if we take a look at the automotive market, I think it’s going to be very attractive over the next year. move from Europe to North America and move many of their products. And when I said in my comments, we communicated with a lot of our consumers, I think in the next few years, you’ll see some consumers move production, European production, especially in aerospace, automotive, etc. , either in China or more likely in North America, and then re-export, so to speak, that product to North America.
Operator
The next one comes from Frank Mitsch of Research.
Frank Mitsch
When you retire from Maple Shade, you will increase my taxes. So I’m sure how I feel about it.
Pierre hunter
If you negotiate your publications for us, we already pay them a fortune, so maybe. . .
Frank Mitsch
This is a non-negotiable task. Some quick questions about money. Phil, in terms of loose money in the fourth quarter, is it moderate to expect that he can generate an additional $100 million there?And it’s on track to get $540 million in money early next year. You have a pretty blank record right now. What do you think of the odds of M
Phillister
Yes, Frank, in terms of loose money matrix, as we said, $409 million until the end of the first 3 quarters of this year. We expect to see pretty significant net operating capital in the fourth quarter, especially with everything they’re doing around production rates and given that the final market situations are deteriorating, either due to some call for destruction and some seasonality. Therefore, net operating capital deserves to materialize. We will focus on ongoing capital expenditures in the 3 functionality product projects we have discussed. But in terms of the ability to generate more than $100 million in loose cash in the fourth quarter, we actually expect to be on the right track. in loose money from ongoing operations.
In terms of liquidity deployment, yes, net money gains of $540 million after taxes. There will be some changes to the final statement, but that’s what you can assume by moving back to our balance sheet. As we indicated in our ready comments, this gives us the opportunity to obtain complementary acquisitions. It also allows us to continue to implement percentage shareholder buybacks as well as a competitive dividend. But we will still have margin given our leverage and given our leverage well below our net debt target of 2x to be able to make specific acquisitions. I remind you that in the coronavirus period, we fainted. We bought our momentary aerosol foam insulation business. We bought 2 more corporations in Advanced Materials and that was because our balance sheet was flexible enough to be able to buy those corporations at a decent price. Again, we would look at that flexibility as we navigate a slightly slower economic environment.
Operator
Your next consultation comes from David Begleiter of Deutsche Bank.
David Begleiter
Peter, on his slide 12, looking at 2023, indexed a number of positive and negative challenges. Do you have any initial minds about the EBITDA of 23 compared to the roughly $1. 2 billion you’ll earn this year?
Pierre hunter
Boy, David, I appreciate the question. You give me the variables and I will give you the number. Without looking to sound too evasive here, I think the year will probably look a lot like 2022 but in reverse, so to speak. I expect we will see innovations everywhere in the year, as we see the effect of our load relief projects and other opportunities we have to get the product through our Geismar separator, as we see the capital we invest come to fruition, as we see the full integration of recent acquisitions, etc. I think while the year is still pretty flat, we’re going to see those innovations throughout the year. And so I’m not too positive but I’m quite positive over the course of the year, we’re going to do more than the market on a relative basis.
And as I said in my prepared remarks, I think the year will begin to control inflation. Much of the inflation in the United States is due to the failure of our own energy policies here. And I think a lot of that will be addressed here after the first of the year. And I’m sure that China, when it opens up absolutely economically, I think it will open with a pretty strong call given the length of those restrictions on economic growth.
Operator
Next up today is from Andrew Castillo of Morgan Stanley.
Angel Castillo
I just wanted to communicate a little bit more about MDI and the competitive environment I would possibly see there. You’ve noticed that you manage your assets by about 50%. I’m curious about what you see in the industry as a whole. And in particular, when you think about value dynamics and your efforts to pass prices and surcharges, can you tell us how it’s progressing, how it’s evolving?fourth quarter compared to what you would possibly like and the possible benefits?
Pierre hunter
Our energy forecasts for the fourth quarter, it’s safe to say that they are quite parallel to the existing market scenario: the prospective market figures. If I were to look at the futures numbers for December and the rest of November, it shows a slow increase of months. If temperatures remain warmer than usual, they have done so so far this season in Europe. Look, we’re going to continue to increase costs and surcharges where we can. But we’re not going to do that to destroy our customers.
And I think we’ve been leaders, especially relative to our length here in Europe in terms of pricing and looking to drive costs as aggressively as possible. And obviously we’ve put the cost of our product into the moving volume. I think you can look through the competitive landscape of polyurethane. And when I look at our third-quarter numbers, we had to offset all of our raw curtain increases in the third quarter through pricing and value discipline. I think that says a lot about the seriousness of – and our commitment to setting our values in relation to volume.
Having said that, I think the moment you start focusing the end of the year in terms of visitors, visitor segments, etc. , we are disproportionately geared towards the automotive industry. Some from the insulation industry, footwear, ACE markets and so on, CWP. Other polyurethane players will be more inclined than we are towards devices and artificial leather and other applications. So, you wouldn’t necessarily need to read that everything we do is what the rest of the industry does and vice versa. Don’t feel comfortable commenting on what others see with your margins, demand, and capacity utilization.
But like we said, we’re going to keep going. In our opinion, this is not the time to also be operating plants to check to accumulate stock. You come to the end of the year with the amount of uncertainty. adapt our production to a large extent to the demands of visitors.
Operator
The next one comes from Mike Sison of Wells Fargo.
Mike Little Bustard
Peter, I wanted to see another chance at 23%. So if I look at the midpoint of the fourth quarter, multiply it by 4, that’s a pretty low number. But as you said, that includes a lot of downsizing and probably isn’t the right speed to think about Huntsman’s lower earnings. So if you write a deletion, I don’t know if you can do that, but if you can normalize the destocking in the fourth quarter, what do you think that number would be?And is that a better way to think about what an empty earnings count would look like for Huntsman at 23?
Pierre hunter
No, I don’t think it’s a smart way to look at it because the fourth trimester is going to have a seasonality that it doesn’t have regularly in the other 3 quarters. It’s going on to have steady stock relief with and capital control that top corporations do even in general business situations in the fourth quarter. And I think there will be a lot of volatility. My private prediction would be that we saw a low quarter herbal fuel value in Europe here of around $8, $7, $8 according to MMBtu. with perhaps north of $50. So, you’re going to see some of the peak values for volatile herbal fuels in the fourth quarter. What will be the total production of a year, I think there are too many, there are too many moving parts.
As I look at our business and look at the last component of 2022 and think about it on an opposite long-term basis in 2023, again, I think we’re going to start the year with real headwinds. from the fourth quarter to 2023. You would probably see more symptoms of optimism than long-term pessimism in 2023. But again, I must be very clear. I’m looking to see what I’m looking at to see an end in November and December. for the fourth quarter. 2023 really murky looks. I mean, take a single variable to determine what Russian fuel and what Putin decides to do with sanctions on herbal fuel and crude oil. And it will have tens of millions, if not many millions of dollars of various effects on our business.
Operator
Today’s next one comes from Matthew Blair of TPH.
Matthieu Blair
Pierre said it operates its MDI plant in Rotterdam at around 50%. It expects safe imports and overall negative EBITDA in Europe for MDI. Is it possible to close this plant and be totally dependent on imports at a lower price?Can you communicate about the considerations there?
Pierre hunter
Yes. Well, of course it’s conceivable to do that. I’m not sure it’s very practical to do this just because there are 2 things you have. It has a series of constant prices that will be there whether you operate the facility or not. These will be constant prices that will come with your take or minimum payment agreements, other people build hydrogen and CO units. Then there are your services providing new utilities, your hard work costs, etc. So we’re not going to fire all of our painters and rehire them in 6 months. So all those constant prices that you are going to have closures or not your installation. One other thing I would say, and this is — generally, again, I say generally, metered-dose inhaler factories don’t work very well below 50% utilization capacity. You essentially make, it’s a very technical term here, but you essentially make glue. And you move the glue through your pipes and so on and through your process. And as it slows down, it runs an ever-increasing threat of messing up the installation, so to speak. And regularly those plants are not doing very well, well below 50%. So I think it’s as low as possible until the factory closes.
I remind you that from our European installation, we have 2 lines there. Think of a capacity split of around 35/65, so we can close the smaller unit if we look for it and work harder on the larger, newer sets. We did this in Geismar, Louisiana, during the recession of 2008 and 2009. We had 1 of our TVs that had been idle for over a year.
The other variable, I would just ask you to stay in your brain when you think about the concept of the metered dose inhaler movement globally. We thought a lot about moving MDI from the US to Europe last August, when the value of fuel in Europe was $100 and running at $100 a day. At the time, there was over $1,000 consistent with a ton of difference between US values and European values. Again, when I say $1,000, don’t forget about $400 of that has to go to freight, logistics and handling, etc. What doesn’t come with that $400 million is also its working capital, specifications, etc. it takes about 2 months give or take a few weeks of that number to get the product here. So if we had moved the product to August, building the stock to move it to the end of September, moving it, you would have moved the product here in November, where the fuel value is around $10, $15. So there wouldn’t have been much point in moving MDI when you do that, you have to take speculative coverage, so to speak, that what I’m moving today is going competitive 3 months later. And so many variables there.
So, again, Matt, sorry, the reaction was complicated, but it’s much harder than other people say to move the product. If you’re going to do it, it has to be anything that, in general situations in the current environment, on a standardized basis, is willing to do it. And it is in a position to close a factory in its entirety and complete it from abroad. Or he’s just going to bite the ball and take the threat on some of those kinds of things. But with regard to the closure of our Rosenberg plant, our European metered-dose inhaler capacity, I don’t see market situations coming to that. As I’m sitting here today, I don’t see the market Situations that get to the point where we would run this plant, this whole plant.
Phillister
And indeed, our load competitiveness on the Rotterdam load curve, which is the largest MDI facility of the moment in all of Europe, remains incredibly exciting for others, especially with the position we have in aniline and energy-intensive production in the UK at a much higher level. level. lower value of herbal fuel to continental Europe.
Operator
The next one comes from Matthew DeYoe of Bank of America.
Matthew of Yoe
As you move the volume out of HBS activity. Is this PU production offline?Are you moving those polymer molecules to markets?And when you do that, what’s the. . . Is there a headwind from this combined change?And what would that look like?
Pierre hunter
Everything will depend on the market demand, costs and margins that are presented to us at that specific moment. Ideally, most of those products we move to HBS have other applications of aerosol foam and rigid insulation. So, we have an opportunity to move that. If we don’t move forward with HBS, we have the opportunity to do so. But in general, it is also the same product that is intended for CWP, composite wood production, OSB and plywood applications.
I remind you, however, that this is sometimes our lowest margin MDI. It’s our polymer, it’s our core quality MDI which is one of HBS’s strengths, it’s that you take what would otherwise be part of your bass – mark the fabrics and move them upstream, if you wish. So, usually, I’d like to think we can find him a home. But there isn’t, it’s not necessarily a black and white answer. You put in that tonnage.
Phillister
And in general, if we run this product through HBS, it’s not just an MDI polymer. We also associate it with a fragrant polyester that is our own generation that we bought in 2013 and this makes it a much proposition as we sell a later formula on the market than just an MDI polymer component.
Pierre hunter
Oui. Et operator, why wouldn’t we take one more given the time constraints, etc. ?
Operator
Certainly. Our last consultation comes from Laurence Alexander of Jefferies.
Lorenzo Alejandro
Just with regard to European restructuring, is it fair lately to characterize it basically as a realignment of costs, because its consumers have not yet made their repositioning decisions?And also probably some other European restructuring circular was needed once they made their decisions, but also whether the capacity will be moved to the US. Do the U. S. and China have enough capacity in position to deal with the next bottom-up cycle if there is also going to be a structural replenishment of capacity in those areas?I’m thinking about the MDI side.
Pierre hunter
Yes, the right question, Laurence. Je I would say no, on the show we announced today, you’re looking for about three hundred positions. And we’re actually looking to calibrate that business around what we think is the new truth of the market. . And look, when I look around Europe, I look at spaces like insulation, aerospace, lightweighting, aerosol foam. A giant component of infrastructure spending. A lot is happening to move to the car. These markets will continue to exist in Europe. They will continue to thrive and so on. And we are moving on to continue to want technical and commercial infrastructure for them.
Now, too, as you well know, it will be consumers and energy-intensive programs that have already talked about moving. And some of the OEMs, if you produce something that’s happening to somebody you produce glass or fabrics that go into the car in the spaces and coatings and some of the adhesions and programs, which happen to move because they’re more energy intensive. Again, not all of them, but some of them will move. And we try to calibrate all of that in the most productive way possible.
And I think what we’re going to do today and not just the jobs, but also move, again, we’re going to move 125 to 150 of the jobs to Krakow, Poland, where we have about 35% less hard work. cost, again, depending on the position and country they come from. So looking at this arbitration, I don’t see us coming here in 6 months or 12 months from now and saying we’re going to have some other cut and some other repositioning because of where we see consumers falling. I think we’ve put a lot of concept into this over the last 6 months and I think we have a pretty clever concept of who will stay, who will stay and which consumers. They’re going to be here for the long haul. And, frankly, who’s going to have the monetary strength. Many consumers today. Not only do we take a look at our consumers’ margins, we also have to take a look at the creditworthiness of our consumers.
As we take a look at this surplus of curtains and have the product to supply all our visitors, I’d like to think we will. But as we’ve said in the last two quarters here, we’re in transition and we’re going to continue transitioning. So as we see a large portion of this visitor base moving from Europe to North America, we will shift the volume from low-margin spaces from South America and less successful programs to North America. As everyone on this call knows. We just opened our separator in Geismar, Louisiana. We’ve gotten rid of some of the polymer programs we’ve provided over the last 15 or 20 years. And we also transfer that tonnage to the processing companies.
So again, to the extent that we can’t supply everyone who moves and we have shortages, frankly, this is an opportunity for us to shrink the back and take some of this low polymer trade margin. If it’s not as successful as we’d like, break it down, upgrade it, and move it to higher-level applications. And frankly, we have the ability to do that in China. We have the ability to do this in Europe and North America. And those volumes can also be supplemented with purchased polymeric MDI, as well as raw MDI from around the world. So I’m very satisfied not only with our ability to deliver MDI, but, more importantly than delivering MDI, we need to deliver cost-effective MDI. We need to get it where we can get it: we can fill a niche where we can get a little more price, margin, and skill advantage. And that, ultimately, is the urethane business that we continue to see growing here.
Operator, with that, we would like to thank everyone for taking the time to pay attention to us this morning and wish you all the best.
Operator
Thank you. This concludes the call of today’s convention and webcast. You can unplug your lines right now and have a glorious day. Thank you for your participation today.