Ivan Marcuse – Vice President-Investor Relations Peter Huntsman – President and Chief Executive Officer Sean Douglas – Executive Vice President and Chief Financial Officer.

Kevin McCarthy – Vertical Research Partners Frank Mitsch – Wells Fargo Securities Aleksey Yefremov – Nomura Mike Sison – KeyBanc Laurence Alexander – Jefferies Hassan Ahmed – Alembic Global Robert Koort – Goldman Sachs John Roberts – UBS Jim Sheehan – SunTrust P.J. Juvekar – Citi Roger Spitz – Bank of America Merrill Lynch.

Good day, ladies and gentlemen, and welcome to the Third Quarter 2017 Huntsman Corporation Earnings Conference Call. My name is Derrick, and I’ll be your operator for today. At this time, all participants are in a listen-only made. We shall facilitate a question-and-answer session towards the end of the conference.

[Operator Instructions] As a reminder, this conference is being recorded for replay purposes. At this time I would like to turn the conference over to Mr. Ivan Marcuse, Vice President of Investor Relations. Please proceed..

Thank you, Derrick; and good morning, everyone. I am Ivan Marcuse, Huntsman Corporation’s Vice President of Investor Relations. Welcome to Huntsman’s third quarter 2017 earnings call. Joining us on the call today are Jon Huntsman, our Founder and Executive Chairman; Peter Huntsman, President and CEO; and Sean Douglas, Executive Vice President and CFO.

This morning, before the market opened, we issued a press release announcing the termination of our merger with Clariant as well as our earnings for the third quarter and first nine months of 2017 and posted it on our website, huntsman.com. We also posted a set of slides on our website, which we will use on this call this morning.

During this call, we may make statements about our projections or expectations for the future. All such statements are forward-looking statements. And while they reflect our current expectations, they involve risks and uncertainties and are not guarantees of future performance.

You should review our filings with the SEC for more information regarding the factors that could cause actual results to differ materially from our projections and expectations. We do not plan on publicly updating or revising any forward-looking statements during the quarter.

We will also refer to non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, or loss and free cash flow. You can find reconciliations to most directly comparable GAAP financial measures in our earnings release, which has been posted to our website at huntsman.com.

In our earnings release this morning, we reported third quarter 2017 revenue of $2.2 billion, adjusted EBITDA of $340 million, and adjusted earnings of $0.67 per diluted share. I will now turn the call over to Peter Huntsman, our President and CEO..

Ivan, thank you very much. Good morning, everyone, and thank you for taking the time to join us. Let’s turn to Slide number 3. Adjusted EBITDA for our Polyurethanes division was $245 million. Our MDI urethanes business, which includes propylene oxide, polyols and systems businesses, recorded adjusted EBITDA of $254 million.

All of our MDI production units operated at high rates during the third quarter, and as a result, we delivered strong global volume growth of 8%. We estimate that the impact of Hurricane Harvey was about $15 million for the quarter.

We’ve remained strategically focused on growing our downstream specialty and differentiated businesses, notwithstanding the sustained strong component margins.

As part of our long-term strategy to shift more of our portfolio to differentiated and more specialty MDI products, we continue to deselect the less stable margin component business in favor of long-term, more stable differentiated MDI systems. These differentiated MDI systems saw a 16% year-over-year improvement in volumes globally.

Strong ongoing global demand combined with continued tight supply conditions advanced favorable price dynamics in component MDI in both China and Europe. Though subject to seasonality and industry operating reliability, these positive demand trends should continue well into the future. Let’s turn to Slide number 4.

Our global differentiated MDI sales represent approximately 75% of our total MDI urethanes business. As a result, our portfolio is much less susceptible to swings in component MDI pricing. Industry operating rates are very tight with global effective operating rates above 95% capacity utilization.

Industry demand for MDI is growing at about 6% globally on an annualized basis. As such, industry capacity needs to expand at about 400,000 kilotons annually, or about one world-scale facility per year. As of today, we believe industry manufacturing capacity will grow approximately 4% annually from 2016 through 2021.

Given the long lead time, in excess of five years, required to bring on greenfield MDI capacity, we have good visibility over the next several years. The only new greenfield MDI facility entering the market is Dow Sadara, with a stated capacity of 400,000 tonnes. No other greenfield site is under construction.

We do expect some brownfield expansion and debottlenecks including our own, Caojing, China, facility of 240,000 tons of stated capacity. As is normal and seen historically, we would expect unplanned and planned outages in the industry every year.

As newer MDI facilities have fewer and larger production lines, single plant outages will potentially impact the market, especially when capacity is operating at greater than 90% utilization.

We do expect short-term rates to fluctuate a bit as these capacity additions are absorbed, but overall we see the continued favorable supply and demand carrying well into the future. The chart in the bottom right of this slide shows our exposure to component MDI by region.

Our Asian MDI urethanes business represents 24% of our global MDI urethane sales. Within Asia, about 35% of our Asian MDI urethane sales are component, which equals about 9% of our total global MDI urethanes exposure. Globally, we estimate that our total exposure to component sales is about 25%.

Compared to the prior year’s quarter, our European and Asian component margins have doubled, representing approximately 16% of our global MDI urethane sales.

In North America, due to the structure of our long-term formula contracts, we have much less elasticity and movement in margins, therefore much less exposure to upside and downside margin expansion. We benefited from the margin expansion component in MDI. However, this component margin expansion is confined to a subset of our portfolio.

Our differentiated MDI sales are more stabled and have higher margins over the long haul. Our MDI urethanes EBITDA has shown steady growth since 2009. This is a product of our relentless focus on growing our differentiated portfolio.

Our North American volumes increased 10% as both commercial and residential construction markets drove demand in our composite wood products, adhesives and insulation sectors. With our Rotterdam facility, recently expanded by 60,000 kilotons, now running at full rates, our European region volumes increased 8% in the quarter.

This high growth was driven by our differentiated adhesives, coatings and elastomers, footwear and insulation systems businesses. Asia volumes rose 5%, driven by demand in the Chinese automotive and insulation markets, though we remain capacity-constrained in this region until our new facility in China comes online.

As stated, we expect our Chinese MDI expansion to begin commercial operations in early 2018 with capacity coming online as demand requires. During this past quarter, our PO/MTBE joint venture with Sinopec in China successfully started up and is now running at close to full capacity.

While our MDI urethanes business went well, our MTBE business continues to operate in trough margin conditions. For the quarter, MTBE reported a loss of $9 million in EBITDA, which is similar to the period a year ago. We were impacted by Hurricane Harvey at this facility, but we are now running at full rates.

Looking at the next quarter, we expect MDI demand to remain strong with a seasonal slowdown versus the third quarter and MDI margins to remain attractive versus the prior year. Let’s turn to Slide number 5.

The Performance Products segment was significantly impacted by Hurricane Harvey, which flooded our largest Performance Products site in Port Neches, Texas along with our other Texas Gulf Coast sites. Notwithstanding Harvey, EBITDA was flat with the prior year because of continued underlying improvement in our core business.

We estimate that the hurricane impact to EBITDA in the quarter was about $35 million. Excluding the impact of Hurricane Harvey, we believe third quarter EBITDA would have been similar to the second quarter. Most impacted by Harvey was our North American ethylene derivative businesses.

Were it not for Harvey, our North American ethanolamine and surfactant businesses would have been significantly up year-over-year. We continue to see strengthening in our businesses in both agriculture and oil.

Both our maleic and surfactant products saw some margin and volume benefit from a balanced North American market, due to increased demand in the quarter. Our amines businesses is also growing and improved versus the prior year.

Due to the hurricane, our planned multiyear EO maintenance turnaround was pushed into the fourth quarter, which will impact fourth quarter EBITDA by approximately $15 million. The fundamentals of this business are improving. And we expect our fourth quarter results, even after the planned maintenance projects, to modestly exceed last year’s results.

Turn to Slide number 6. Our Advanced Materials business EBITDA was $56 million. This business continues to focus on growing its core specialty business, which grew volumes 6% in the quarter. The higher EBITDA versus last year was due to improved volumes, partially offset by higher costs.

Growth in our DIY consumer adhesives business and specialty products, including waterborne technology within the coatings and construction business, should offset continued pressure experienced in the wind market.

Our aerospace business remains steady, and we expect to see further growth in our other specialty markets going forward, including in the electronics market in Asia. Our expectation in this segment’s EBITDA in the second half of 2017 will be modestly higher than the first half of the year.

The fourth quarter will see growth in earnings compared to last year. Turn to Slide number 7. Our Textile Effects division reported EBITDA of $19 million, up 15% versus the prior year. This business is growing at above market growth rates.

Its total volumes were up 7% in the quarter, which marks the sixth straight quarter of year-over-year volume growth, which has averaged over 6% a quarter. Our portfolio of products that address our customer needs for sustainable solutions continues to help drive this growth.

The improved EBITDA in the quarter was driven by higher volumes and cost savings. Textile Effects’ return on net assets over the last 12 months has consistently improved and is now above 15%.

We believe that the current position trends for this business will help EBITDA approach $100 million over the next couple of years with a 20% return on net assets. Looking forward in the fourth quarter, we anticipate that the business will see a nominal seasonal decline versus the third quarter, but results should be up versus the prior year.

Before sharing some concluding thoughts, I’d like to turn a few minutes over to Sean Douglas, our Chief Financial Officer..

Thank you, Peter. Looking to Slide 8, our adjusted EBITDA increased to $340 million in the third quarter of 2017 compared to $227 million in the prior year period, pro forma with the sale of our European surfactants business and the separation of our Pigments and Additives business.

The two biggest drivers of this year-over-year improvement in adjusted EBITDA were volume and price, which were only partially offset by higher direct costs and the impact associated with Hurricane Harvey.

We estimate that the impact of Hurricane Harvey was $50 million, $35 million in our Performance Products segment and $15 million in our Polyurethanes segment. Compared to the prior quarter, our adjusted EBITDA increased to $340 million from an adjusted $299 million.

The $41 million sequential improvement in adjusted EBITDA was again primarily driven by price, which more than offset the impact related to Hurricane Harvey. Turning to Slide 9. Free cash flow generation remains a high priority for Huntsman.

In the third quarter, we generated $227 million in free cash flow as compared to $251 million in the prior year quarter. Earlier in the year, prior to the separation of the Pigments and Additives business, we had indicated that we expected free cash flow for 2017 to be greater than $450 million.

We now believe, excluding Pigments and Additives that free cash flow will still exceed $450 million for 2017. Our year to-date change in primary working capital is a build of $171 million as compared with a decrease of about $119 million in the prior year to-date period.

Relating to last year, we reported that we benefited from a one-time inventory reduction due to a step change in inventory management. This year, our working capital build is primarily related to increased sales volume, increased selling prices and increased raw material costs.

Nevertheless, we have maintained consistent receivable and inventory metrics and retained inventory step change made a year ago. Our number of days inventory outstanding for third quarter 2017 improved to 58 days from 62 days a year ago.

In the fourth quarter, we generally see a release of working capital, and we expect a moderate cash benefit in quarter four. We remain focused on strengthening our balance sheet, and our objective is soon to become investment grade. At the end of the third quarter, our net debt to trailing 12 adjusted EBITDA stood at 2.2 times.

This compares to a year ago when our net leverage was at 3.7 times. I believe that this is the strongest Huntsman’s balance sheet has ever been. We transformed our balance sheet with a paydown of over $1.2 billion of debt in the quarter due to the proceeds we received from our successful IPO of Venator.

Just this week, we paid down an additional $100 million of our term loan B from free cash flow. As a result of this year’s debt reduction of $1.6 billion, we have lowered our annual interest expense by about $70 million. At today’s rates, this would place annual go forward interest expense at approximately $130 million.

As a reminder, we still own 75.4% of the equity of Venator and intend to use the proceeds of future secondary offering to further deleverage our balance sheet. Hypothetically on a pro forma basis, if we were to monetize our Venator ownership at recent prices net of taxes, discount and fees, we would have net leverage less than one times.

Related to our separation of Venator and the $1.2 billion of associated net proceeds received today, we estimate net cash taxes to be paid in the fourth quarter of 2017 of approximately $45 million.

The lower cash tax rate to date relating to the separation of Venator is primarily attributable to the tax basis of Venator and returning the proceeds as tax-free repayment of intercompany debt.

With respect to cash taxes relating to the remaining Venator shares held by Huntsman, at the current trading price of Venator, we estimate the cash taxes on future proceeds from follow-on offerings to be between $150 million to $200 million, which represent less than 10% tax leakage in the total Venator monetization.

We benefit from a lower effective cash tax on the overall disposition of remaining shares because of a few key elements, including foreign cash tax credits and tax-free return of paid-in capital. We have now classified Venator as a held-for-sale on our balance sheet, and it is shown as discontinued operations on our income statement.

I also would like to point out that this has increased temporarily our minority interest on the balance sheet by $267 million, which will be removed once our ownership in Venator falls below 50%.

We will be issuing an 8-K along with our 10-Q early next week with certain restated historical financial information that removes Pigments and Additives from our historical adjusted results. During the third quarter of 2017, we recorded an income tax expense of $35 million and paid $21 million in cash taxes during the quarter.

With the $90 million tax refund received in the second quarter, our year-to-date net cash received is $36 million from continuing operations. Our fourth quarter adjusted tax rate should be similar to our third quarter rate of 24%. We estimate that our 2018 tax rate will be in the 25% to 28% range.

2017 capital expenditures for Huntsman will be approximately $290 million. In summary, we continue to focus on generating strong free cash flow. Our balance sheet has never been stronger, and we are quickly approaching investment-grade metrics. I will now turn the call back over to Peter for some concluding remarks..

Thank you, Sean. In the past 24 hours, Huntsman and Clariant announced that we are terminating our proposed merger of equals by mutual consent. I would be less than honest if I did not say this is a disappointment for both companies. It’s a shame that one or two shareholders can have such disproportionate influence.

Through this process, we have come to recognize even more the caliber and the quality of the people, products and culture of Clariant. On a personal note, I have nothing but great things to say about Hariolf Kottmann, his ethics and integrity. I truly wish him well, both him and his company. Now let’s turn to Slide number 10.

Having said that, I’m now proud to focus on Huntsman and our future, and I’ve never been more excited about the future of our company. As today’s earnings results show, we are performing extremely well, and I’m very confident about our ability to grow our business, meet our customer demands and deliver value to our shareholders.

Since the first of the year, we have earned nearly $120 million higher EBITDA than the prior year. We have successfully separated our Pigments and Additives division with the creation of Venator. We took of the company public on the 2nd of August this year.

With the proceeds of our operations and the Venator IPO, this year, we have paid down approximately $1.6 billion of debt. At the beginning of the year, we told you we would generate better than $350 million of free cash flow from our business, including our Pigments and Additives operations as a part of us.

Since that time, we’ve exceeded that number and generated year-to-date close to $400 million without our Pigments and Additives division. Our net debt presently totals 2.2x our EBITDA, down from 3.7x a year ago.

Our downstream urethanes, specialty epoxy and formulation, amines, maleic, textiles and surfactant businesses are all improved from the previous year. Turn to Slide number 11. Going forward, we have four principal objectives.

Number one, we will continue to focus on the safe operations of our business and maximizing our manufacturing performance, margins and cash generation. We should generate in excess of $450 million of free cash flow this year, again without Pigments and Additives.

I would further expect our debt ratio to EBITDA to further improve between now and the end of the year. This will continue to be a priority in 2018. I believe we may well end 2017 close to 2x net debt to EBITDA. Number two, we will continue to monetize our shares of Venator in an orderly fashion.

As Chairman of Venator Plc, I’m quite pleased with the quality of their performance. We continue to keep a close eye on the market and the share price of Venator, as we monitor the next opportunity to approach the market for further sales of shares.

Venator presently has an equity value in excess of $2.6 billion, and Huntsman Corporation owns 75% of the equity. 75% of the equity is equal to about $1.9 billion or over $6 per share after estimated taxes and fees.

Number three, we will continue to invest in organic growth as well as strategic bolt-on acquisitions that will further enhance the margins and growth of our downstream business. In the third quarter, we operated our business at 16% EBITDA margin.

Given the fact that we still see further recovery of our Performance Products division, our MTBE business is at trough EBITDA, plenty of opportunity to continue to put more of our MDI and epoxy in the systems and formulation application, and to see our textile approach $100 million of EBITDA, we will have plenty of opportunity to further expand volume, margins and earnings in the next year or two.

Number four, in the coming months once we reach investment-grade stats, our board will be reviewing, in addition to maintaining a favorable dividend policy, the merits of a meaningful share buyback program to return even further value to shareholders. Let’s turn to Slide number 12.

As I look forward at where Huntsman is going, I see plenty of opportunity to generate much greater shareholder value than what we see today. From a preliminary view of 2018 and 2019, we believe that we should be able to generate free cash flow between $400 million and $600 million per year. We will hit investment-grade metrics beginning in 2018.

Not only should we see a stronger balance sheet, higher margin and sales, but a stronger multiple of earnings with our share price. As I said earlier in my comments, we’ve never been better positioned to create meaningful and sustainable shareholder value. Our future has never looked better. Back to you, Ivan..

Thank you, Peter. Derek, will you explain the procedure for Q&A, then open the line for questions, please..

Certainly. [Operator Instructions] And we’ll take the first question that will come from the line of Kevin McCarthy from Vertical Research Partners..

Good morning, Peter, very strong results in MDI. Would you comment on your utilization rates in the U.S.

as well as Europe in light of the ramp in the new capacity in Rotterdam? And then secondly, you alluded to a typical seasonal slowdown in 4Q, yet as we look at component MDI prices particularly in Asia, they’re up in some cases more than 50% in that region since the first of July.

And so in that context, could you comment on your outlook for profitability in the fourth quarter for MDI from the 3Q strengths that you posted?.

Yes, first of all, I think from the capacity utilization, as we look at our three major operating centers of our MDI Caojing, China and Geismar, Louisiana and then Rozenburg in the Netherlands, all three of those facilities are operating at capacity.

And they have been for the past quarter or so barring some maintenance work that was done earlier this year. We see that continuing – there’ll be a little bit of a typical seasonal slowdown in the fourth quarter, but I really don’t see margins eroding much in the fourth quarter.

You’re right in the component Chinese MDI, which makes up about 9% of our global MDI business, we continue to see – we have seen a real run up in pricing in some of those products, and some of those might cool a little bit in the fourth quarter.

But I think from a – as we look across the board, I don’t see any slowdown on our margins on a per-ton basis. Again, you might see a little bit on the fringes on some of the more commoditized pieces, but I think by and large, we should see pretty stable pricing and margins into the fourth quarter. A little bit of slowdown perhaps on volume..

Great. And then with regard to the merger news this morning, I believe the agreement contained provisions for various contingencies, a no-vote fee of $60 million, break-up fee of $210 million.

By terminating the merger by mutual consent, does Huntsman forgo its claim on any such funds? Or are there scenarios under which cash could flow between Clariant and Huntsman in the future?.

Yes, we just – our termination agreement was filed with an 8-K filing last night so that should be available to the public. But we did agree mutually to terminate the agreement and not wait for a vote. I think that if we waited for a vote, we’re probably looking at, at least a couple of months into the future.

And I think that there is a great deal of uncertainty and a high degree of risk if that vote would ever be successful. And so we mutually agreed that we would terminate the agreement without having to go through those – that multiple months of expenses and so forth.

However, looking at the agreement, if Clariant enters into a deal within the next 18 months to sell the majority of its master batch in pigments businesses, then we are owed $60 million.

Likewise, if Clariant within 18 months enters into a transaction or a series of transactions to sell greater than 35% of the business assets, as measured by revenue or net income, then we will be owed $60 million.

Now if this sales results from a pre-termination proposal or inquiry driven by White Tale’s actions or communication, we believe we’re owed an additional $150 million. And just through all that, I don’t see any scenario where Huntsman would need to pay any part of the $210 million.

So again, there’s been a lot of talk publicly about possible sales or breakups or whatever because of the communications, the actions and demands of White Tale. We’ll see where this goes, but I think that if there is any meaningful divestitures here, I believe that Huntsman is entitled to some funds..

Thank you for that clarification..

Thank you, Kevin..

Your next question will be from the line of Frank Mitsch of Wells Fargo Securities..

Good morning, gentlemen and a nice quarter despite the Hurricane Harvey. Peter, I just guess the key question is you embarked on this megamerger of equals with Clariant.

Now that that’s no longer on the table, where do we go from here? Is that something that you want to reengage with perhaps another company? What’s your thinking about the future of Huntsman as a company?.

Well, I think that the first focus on the business, Frank, is – as we look over the course of the next year or two, very quickly I believe that we’re going to be an investment-grade company, which as you know well our history of M&A work and so forth.

This is a first in the history of our company, and might be the first time going back, I was looking at some genealogical records, at least seven generations of Huntsmans. I might have had – keeping relatives that once didn’t have any debt. I can’t say that.

But as we look at the overall balance sheet, I think that – I’ve said this before the merger ever came about that I believe that our strongest currency is a strong equity. And we really – I believe that our equity today remains undervalued.

I think that when you look at the value of Venator, when you look at the value and sustainability of our earnings, the expansion of our margins, you look at our debt levels and the amount of cash that’s been generated, I think that over the course of the next year or two, our focus needs to continue to be creating that shareholder value and making sure the market understands it, and we need to deliver the results.

I also think that we need to continue to enhance our growth by strategic bolt-on acquisitions as we have done in the past.

These do not need to come at the expense of an investment-grade credit focus, but I think that as we focus on our epoxies, on our urethane downstream businesses and how we can bolt-on those acquisitions and grow at much better than GDP rate around the world, improving our margin and improving our volumes, this is going to continue to be a high priority.

I think that the merger with Clariant is – was truly a unique opportunity. But I also think that over the next couple of years, with a strong balance sheet, with an open mind and with a – an aggressive posture to looking to how to best create shareholder value, look, we’ll have other opportunities to continue into the future..

All right. So it doesn’t look like there’s anything that we should be thinking about in the 2018 time frame in terms of that megamerger, but certainly we could be looking at some strategic bolt-ons where they make sense in your more specialty businesses.

Am I reading that correctly?.

Yes. Well again, Frank, I’d look at our past. I’d just take our Polyurethanes business, where about 20%, 25% of our EBITDA in that business comes from bolt-on acquisitions that we’ve done over the last couple of years. I get very, very few questions about the M&A work that we’ve done over the last couple of years.

And yet when you look at it in its composite, it delivers a meaningful part of our EBITDA and it is combined to make our urethanes business, which obviously volumetrically and from an asset point of view is the core of the business, a very stable and a very steady growing business..

That’s very helpful. Thank you..

Thank you, Frank..

Your next question will be from the line of Aleksey Yefremov, Nomura..

Good morning, everyone. Thank you. On Page 4, you’re showing margin for your MDI systems business, it looks like going up this year.

Would you expect the systems margin to continue expanding in the fourth quarter and in 2018?.

Well, I think that, Aleksey, I think that in the fourth quarter, it’s going to be pretty stable. And as we look at 2018, we continue to see gradual improvement in those systems and formulations business.

Again, this is a business that as we look at the formulation into systems business, you’ll be able to get a little bit of the fly-up as you see the components side. Some of that will past through obviously on the components side, but those price – on the formulation system side. But by and large those prices are pretty sticky.

They’re not going to go fly-up one quarter and they’re not going to come crashing down the next quarter. And they’re typically not dependent on the cyclicality of supply and demand in the market. People are paying you for an entire package of chemistry, of which urethanes is a key component, not the only component.

And so I would assume that over 2018 as we continue to see between 2018, 2019, 2020, continued market tightness. I would see a global capacity utilization being somewhere between the low to mid- and perhaps even going into the upper 90% capacity utilization. We ought to have an opportunity to continue to gradually improve our business margins there..

Thanks Peter.

And to follow-up, you provide us earlier with EBITDA expectations for Caojing and Rotterdam expansions, have your expectations there changed, with MDI margins being higher now?.

Well, I think that what we’ve given you in the past, we’ve told around $20 million I think is what we’ve told you. I would say that obviously if today’s prices continue to be what they are in China, or anywhere close to what they are today, it should be north of that..

Thank you very much..

Your next question will be from the line of Mike Sison, KeyBanc..

Hey, guys, nice quarter as well.

Peter, when you think about – you’ve got EBITDA margins at 60% in the third quarter, when you think about longer term, what do you think the total company can get to, given the momentum in polyurethanes and a lot of the investments that you’ve made?.

Well, I certainly think that it ought to be, over the course of the next year or two, it ought to be closer to 20% than it is to 15%. I think that when you look at this month or this quarter, people might say well, this is an unusual quarter because of component MDI. I would remind you the component MDI is a minority of our urethanes business.

We still see a recovering Performance Products business, our MTBE business continues to be flat on its back. And we were hit with $50 million in the quarter from Hurricane Harvey. So I mean you back those things out, it tells me that we ought to be doing much better than 16%, 17% margin here.

So I would say that while these are strong margins compared to our past, now that we’re focused on a new portfolio with the pigments division spun out and so fourth, we certainly, as a company, ought to be much closer to 20% than we are today..

Okay, great.

And then in terms of the Venator monetization, can you just remind us kind of the timing and lockup periods of when you can continue to start – restart that process?.

Well, I’m going to defer that question to my CFO here, so that I don’t get myself legally in trouble. But I would just say, we’d like to be hitting the market as soon as possible..

Yes. Thank you, Peter. The lockup that we currently face was a 180-day lockup, and that lockup expires near the end of January. And as Peter said, we continue to monitor that closely with the strength in the Venator stock. And certainly, we will look to exit and monetize that holdings in an orderly fashion going forward..

Great, thank you..

Your next question will be from the line of Laurence Alexander, Jefferies..

Hi, Peter. I guess two questions if I may. First, can you reconcile the free cash flow comments so above $450 million this year, $400 million to $600 million as a range for the next few years, with the comments you made around the fact that margins for the firm should be several hundred basis points higher than where they’ve been historically.

There is potential $100 million uplift in MTBE. There’s moderate structure improvement opportunities and most of your peers have flagged fairly strong demand trends and acceleration into the year-end. What do you see as headwinds to keep a limit on free cash flow? So that’s the first question.

And secondly, as you look at the process you’ve just been through when you think about strategic moves down the road, anything changing in your approach because of this? I mean, things that – I mean anything that we should think about that you would just rule out at this point?.

Well, I think that as we look at reconciling what we’ve kind of forecasted and so forth, I take it very seriously when I or any of the other senior officers of this company give any direction to the market or numbers going forward. And I would always like to see myself in a position to be able to meet or beat those expectations.

So the numbers that I’ve given you going forward, where we are today versus the reconciliation of the range going forward, I would hope that those are numbers that we ought to be able to not only hit those numbers, but exceed those numbers. And I hope that you haven’t – you wouldn’t read that as somehow that I’m pessimistic of the future.

Not – to the contrary, I’m very optimistic of the future. I just don’t ever want to see us in a position where we’ve told the market we’re going to be at 10, and we come in at nine.

So I think that as we look at the biggest headwinds, I would say on free cash flow, probably would be two macroeconomic events which typically wouldn’t go hand in hand, one would be higher raw material prices which obviously would put pressure on our working capital.

And the other would be a macroeconomic slowdown, which would obviously slow our EBITDA performance, as it would with any company, sort of those two issues I – as I look across our portfolio, whether it’s in maleic and epoxy and amines and urethanes, I simply don’t see a lot of capacity going into the global market in the foreseeable future and I think there is probably a fair amount of uncertainty of global stability in the next couple of years.

For people to build grassroots facilities today, you’re making a bet on where the economy and where the demand is going to be three, four, five years down the road. And there’s just not a lot of capacity coming on in the market in the next couple of years. So I remain very bullish, and I remain quite optimistic about what’s going on.

As I look at the strategic moves down the road, I would hope that we would be precluded from doing a bad deal.

So, I mean aside from that, I want to make sure that again, I think – I hope that you’ve taken from this call and from our previous calls our focus on generating cash, getting to that investment-grade level and maintaining that investment-grade level.

But yes look, if we somehow just got the deal of the century, would we lever to the point of exceeding investment grade? It would have to, in my opinion, it would have to be something close to the deal of the century. This is something that we’ve worked multi-years and we’ve worked very hard restructuring the business to be able to attain this.

And – no, I think that we’re in business to create shareholder value. And you look at the biggest shareholders in this company remain involved on our board and management. And we want to increase shareholder value. So..

Thank you..

Thank you..

Your next question will come from the line of Hassan Ahmed, Alembic Global..

Good morning, Peter..

Hey, Hassan..

Peter, obviously, you have really good margins within polyurethanes. And I guess you are talking about tight conditions to remain for a while. I mean I’m looking at the margins, 20% to 21% EBITDA margins, you’re talking about MTBE sort of still in a trough.

Just wanted to sort of get your views on where you see these margins going if these tight conditions prevail, number one. Number two part and parcel with that, it just seems that over the last couple of months, be it within the Polyurethanes segment or for Huntsman overall, some of your raws have been going up as well, be it benzene, butane.

Propane has been popping. So maybe that has an impact on propylene. So just wanted your reconciliation of tight conditions, yet raws creeping up and where polyurethane margins would go in that sort of an environment..

Yes, I think that raw materials – I guess I’m – as I look at present crude price somewhere in the low to mid-50s, right, it feels given how much capacity out there to produce crude oil, it feels like crude may be a little high. That’s raw materials, I mean it kind of just cascaded on that higher crude price.

Downstream, it seems like raw materials might be a little high right now.

But as I look across the board, again most of our product, I think that most of our products are tight enough now, that any increase in raw material, particularly in urethanes around benzene and the raw materials propylene and what is going into propylene oxide and polyols, we ought to be in a strong enough position to be able to pass that on.

And as I look at margins in that business, I think that we want to be obviously be able to generate shareholder return, and that is something that we can – that’s sustainable that can attract investment dollars.

But at the same time, we don’t want to be the point in pricing, really in any of our products and urethanes in particular where we’re encouraging people to use less of MDI or destroying demand or alternative – people using alternative raw materials and so forth.

And so as I look at the EBITDA margins being somewhere in the low to mid-20s on a sustainable basis again, there’ll be opportunities and blends and so forth that are certainly higher than that. And I’m not saying that we’re capping things out, but I think there is a fine line to walk between that.

And I do see opportunity to continue to further expand margins. What I also want to make sure that our sustainability of margins is also something that we’re achieving as well..

Makes complete sense. Thanks for that. As a follow-up, Peter, you talked about, particularly in the Polyurethanes business, call it 20%, 25% of earnings consistently coming from sort of ongoing bolt-ons. Obviously, the market’s rallied not just here in the U.S., but globally.

I mean, have you seen a meaningful change in the valuation for some of these assets that you may be interested in? Or I mean are they still sitting at levels, which are quite attractive once you fold them into the broader sort of Huntsman Corporation?.

Well, I think that to answer your question, I think asset valuations right now are high. And as we look at where we want to be going downstream on an ongoing basis, we’ll probably be looking at as much organic growth and organic investment perhaps a little bit more than we have in the past.

I don’t believe that these high values that we’re seeing in some of the assets are sustainable. And so, I think we do need to be patient, but I think that at the same time, when their high raw material prices to some of the downstream material consumers of urethane raw materials, remember we’re enjoying the higher margins.

Some of those downstream applications are enjoying – well, are struggling with perhaps higher raw material prices and struggling margins. The combination of their business and our business may make more sense today than perhaps it did a couple of quarters ago. Integration works in some of these cases.

So I think you really have to take it on a case-by-case, asset-by-asset basis..

Very clear. Thanks so much, Peter..

Your next question will come from the line of Robert Koort, Goldman Sachs..

Thanks. Good morning..

Hey, Rob..

Peter, I’m trying to figure out the importance of that component MDI market. So that the data you put on Slide 4 is quite helpful. I’m wondering if I look maybe sequentially from the second to third quarter, you guys had about $80 million more EBITDA in that segment.

Can you parse that out? How much of that was from component MDI versus differentiated?.

I would say, if you look at it in broad numbers without getting into specifics on customers and exact applications or regions, it’s pretty close I’d say that about half of that number. About $40 million of that, I would say, is attributable to – I don’t want to use the phrase the component fly-up, but I used the phrase components fly.

I think that the other $40 million of that really is we see it in further growth. I talked about 16% year-on-year growth in some of our downstream businesses and so forth. And again, those are – I see those as really being sticky. And I see that differentiated growth in that mix as being a big chunk of that other $40 million.

There’s greater volume obviously when we saw volume over the prior quarter of 11% globally on MDI and over the prior year of 8%. Those are – there’s a big chunk of that $80 million that’s volume, a big chunk of that is margin, and a chunk of that is other. So I think that fair to say about half of that..

That’s helpful. If I look at Advanced Materials, obviously it’s very healthy respectable margin, but seems to be stuck in a no-growth mode for the moment.

What can precipitate getting back into some more respectable growth rates there?.

Well again I think as we look at the volumes, the key there is going to be the pushing up the volumes, since we look at the volumes year-over-year, we’re about 6%, 7% improvement, much better than what we’re seeing in global GDP.

I think that when you look at the core of that business, a lot of the surface sciences, a lot of the adhesive the DIY, the aerospace market, those continue to grow quite well. And I think you’re going to see aggressive growth in those areas in 2018.

As I look at the basic component side of the epoxies, particularly around wind and BLR, we do continue to deselect from that volume moving into higher margin, higher volumes and on the other side. So I think that there’s a lot of noise that’s behind that number.

While it looks like it very stable, we’re seeing an end to that business that continue to grow volumetrically. We see other ends of the business around the component side – the BLR side, the wind side that actually are going down. So, I think when you look at the core of that business, it’s doing quite well..

And you gave us the info on polyurethane with components.

And now how would you characterize the BLR and wind composition within AM?.

As far as the overall volume?.

Yes, how big are those businesses, right, relative to the whole Advanced Materials?.

Boy, I would have to speculate on that. I think between BLR and wind, you’re probably looking volumetrically around 10% or so..

Okay. Got it. Thanks very much..

Okay..

Your next question would be from the line of John Roberts, UBS..

Thank you. Peter, you were going to move some of your excess ethylene oxide from glycol into Clariant sulfoxylates as part of the deal.

Doesn’t that still make sense as it maybe a contractual relationship between the two companies?.

Sure. And I would just say that as we separate the merger of the two companies, I would certainly hope that a lot of the collaboration and so forth that we worked on together over time will continue in some of these arrangements. We’re certainly closer to Clariant today than we were a year ago at this time.

So yes, I mean where there’s opportunity for a win-win here, we’re certainly going to continue to pursue that on those sort of arrangements..

And then would could you remind us of your propylene oxide balance, sort of the same way you did with MDI? You only have PO capacity in the U.S. So I assume you buy all of the PO for your overseas systems.

And do you use all of the PO that you produce in the U.S.?.

No. We don’t – we’re actually short on PO globally. We’ve secured that PO globally through various means and contracts sometimes even through exchanges and so forth. Obviously with the start-up in China of our facility with Sino Pak, we will have a very healthy source of propylene oxide supply – who supplies in China.

In the U.S., we also we commercially sell the PO. We also derivatize the PO into propylene glycol and then into other surfactants and amines applications. We also do some of our own polyol manufacturing as well. So I think we try to have a good balance.

I have absolutely no problem buying from a competitor PO if we can turn around and make money off that. So I think we try to balance that between derivatizing our own downstream, buying from competitors and also producing with our own joint ventures..

Thank you..

Your next question will be from the line of Jim Sheehan of SunTrust..

Thank you. With respect to the hurricane impacts on the U.S.

Gulf Coast and other natural disasters, are you seeing any signs of abundant demand for polyurethanes from the auto or housing construction industries? And if so, when would you expect to start seeing that?.

I met with our Polyurethanes leadership, commercial leadership team here just earlier this week, and we’re really not seeing anything. I would say that you probably – let’s not say it’s not coming.

you’ve got 210,000 structures that were damaged, either completely or partially, with a lot of insulative material and so forth, and just in the Huston area that didn’t include the damage that was done in other parts of the Gulf Coast and Florida with the weather problems that are there.

I think that as we speak with our customers, and you look at some of the downstream derivatives, you’re probably looking at the first quarter of next year where you’ll see – first, second quarter of next year, where you see some of that demand. I don’t think that you’re going to see a big huge wave of demand coming through.

I wouldn’t be counting on something like that. But no, that the – the strong demand that we’re seeing right now in the third quarter and that we’re even seeing in the fourth quarter, I would say that virtually none of that volume is due to the storm..

Great.

Where do you see MDI inventories today? And when will you expect them to normalize?.

We don’t carry a lot of MDI inventory. I mean, it’s not like TiO2 where you’re building from one season to the next and so forth. I think that capacity utilization is a better means of inventory, rather than producing huge stockpiles. We would just choose to slow down a facility, rather than have a stockpile of MDI.

And as we look at today, global capacity rates are around – I would say it’s in excess of 95% capacity utilization. If you look at the design rate, you’re probably in the low 90s.

Again, how much is actually designed and what you’re able to operate it, and as I said in my earlier comments, MDI lines as you get these larger and larger facilities, you will get some of our facilities in Europe or in Geismar, we have three or four lines in a facility.

And it’s not unusual to lose a single line due to contaminants or switching over products or maintenance issues and so forth. And we lose a line in one of those facilities, and it’s not something that we feel we have to report to the market. It’s not a big financial hit. you just – we’ll ameliorate the other lines and make up for it.

If you have a single line, train line of 200,000 to 400,000 tons and you lose that single line, you’ve got a world-scale facility that’s going to come down. It’s going to cause repercussions on a global basis.

So when we look at inventory, I would say nearly as MDI, I’m looking more at capacity utilization, and where we’re operating today, something north of 95% globally. And exactly where we go with that going forward. I think that that’s something that we’re going to keep an eye on.

Traditionally, we’re sitting at about total days of usually around 40-some-odd days. And our business today as I just look at our DIOs, we’re in the low 30s, which would be pretty standard if you’re operating at – in the capacity that’s better than 95% utilization.

So you typically are trying to rebuild a little bit of capacity here in the fourth quarter, but it’s not a as terribly seasonal time. But I – again as you look at that entire supply chain the customer and that manufacturing, end it’s all quite snug right now..

Thanks. And, Peter, when you first announced the Clariant deal, I think you made some remarks about achieving a greater scale and being one of the rationales of the merger.

Is Huntsman stand alone, does it have sufficient scale in order to achieve your long-term goal?.

Sure. I mean, it does. And we’re still one of the largest chemical companies in the world and certainly one of the largest in North America. And I think when you look in our various around MDI, our amines business our surfactants business, our epoxy business.

And the areas where we compete, we are among the global leaders, if not the global leaders in this area. So would we like to become larger? And do we have an infrastructure that could take on a couple of billion dollars more of the business without expanding greatly our SG&A? Yes. I think that we are suited to be able to do that.

Do we have to do that? Is that something that we have to do in order to survive? Of course not, but it’s certainly something I think that we’re capable of taking on more volume, more capacity and growing our business..

Thank you very much..

Operator, I think that because of the time, I’m just looking at – we still have a couple more questions. we typically try to limit these calls to an hour.

But because of the questions surrounding so many of the operational issues around the merger and so forth, why don’t we take two more questions?.

Certainly. Your next question will be from the line of P.J. Juvekar, Citi..

Yes. Hi. Thank you. Peter, quickly, I know there have been some shutdowns in the urethane exchange in China related to environmental crackdown.

Can you just describe that for us? What’s going on there? And how does supply – how much supplies were taken down? And so when adds capacity, how do you see supply demand going forward?.

Yes. I think that as I look at our pigments business, our textile business, these things have been materially impacted because of environmental policies. And I look at our urethanes business, I don’t see anybody in – I’m not aware of MDI capacity that is being shut down because of Chinese environmental regulations.

I haven’t seen that and I wouldn’t say that has anything to do with the lack of available product..

Okay.

So it is purely because of high demand that you’re seeing this?.

Yes, it really is.

And again, as I look at the demand in China in Asia, I would just remind you that Asia for us now partially because we don’t have as much product as we’d like to be able to supply, but most of the demand that we’ve seen globally is coming as I look year-over-year versus even the prior quarter, most of the demand growth that we’re seeing is in Europe and the U.S..

And in your Performance Products, your volumes are up 12%. EBITDA was flat. Can you talk a little bit about amines and maleic and what’s going on there to keep EBITDA flat? Thank you..

Our margins are – I would say our margins are flat in those areas. If not expanding. I think the reason in the flatness is more around the storm effect and the impact that we saw in the TNI. And I would just say that all of our facilities are up and running from the impact of the Harvey storm.

And the ethylene oxide and ethylene glycol turnaround has been mechanically complete. And we’re in the process literally over the next 24 of 48 hours of starting that facility back up. So, I think most of that flatness is due to maintenance and storm, not the products. The products themselves are continuing to see an improvement in volume and margin..

Thank you..

Your final question will come from the line of Roger Spitz, Bank of America Merrill Lynch. Roger, your line maybe on mute..

Yes, sorry about that. Good morning. Thank you very much. I just wanted an update on any 2017 cash restructuring, which I think less than 75 in cash pension to I think less than 150, and the Venator separation costs, which I think have been less than $100 million.

Are those still good numbers? Or should we update those numbers?.

Cash restructuring, it’s certainly tapered off. You’ll see going forward very little there. I think primarily, you’ll see it continuing on in Textile Effects, but a very, very low number going forward, less than call it $10 million per year, as we have a long tail on a few contracts there from Basle, Switzerland when we shut that site down.

But generally, I can say that that’s – that we’re really tapering down on that. You shouldn’t see a lot more going forward as we sit here today..

Perfect. That was it. Thank you very much..

Roger, thank you very much. Thank you all very much for your questions and interest..

Ladies and gentlemen, that concludes today’s conference. We thank you for your participation. You may now disconnect. Have a great weekend..