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

Frank Mitsch - Wells Fargo Kevin McCarthy - Vertical Research Partners Hassan Ahmed - Alembic Global Advisors Jeffrey Zekauskas - JPMorgan Securities Michael Sison - KeyBanc Capital Markets, Inc. Daniel Rizzo - Jefferies & Co. Robert Koort - Goldman Sachs & Co. Eric Petrie - Citigroup Global Markets, Inc.

James Sheehan - SunTrust Robinson Humphrey Matthew Blair - Tudor, Pickering, Holt & Co. John Roberts - UBS.

Good day, ladies and gentlemen, and welcome to the Q4 2017 Huntsman Corporation Earnings Conference Call. My name is Emma, and I’ll be your operator for today. At this time, all participants are in a listen-only made. We will conduct a question-and-answer session towards the end of this conference.

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

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

This morning, before the market opened, we released our earnings for the fourth quarter and full-year 2017 via press release and posted to our website huntsman.com. We also posted a set of slides on our website, which we will use on this call this morning while presenting our results.

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 these projections or 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 the 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 fourth quarter 2017 revenue of $2.2 billion, adjusted EBITDA of $360 million, and adjusted earnings of $0.76 per diluted share. I will now turn the call over to Peter Huntsman, Chairman, President and CEO..

Ivan, thank you very much. Good morning, everyone. Thank you for taking the time to join us. Let’s turn to Slide number 3. Adjusted EBITDA for our Polyurethanes division for the fourth quarter was $294 million. Our MDI urethanes business, which includes propylene oxide, polyols, and system businesses, recorded adjusted EBITDA of $291 million.

This compares with $130 million of year-ago and $254 million for the previous quarter. Our MDI delivered 12% volume growth year-over-year, demand remains solid and all of our MDI production units operated at full rates during the fourth quarter. MDI urethanes EBITDA margins remain strong globally as we continue to operate at full capacity.

Let’s turn to Slide number 4. We remain strategically focused on growing our downstream specialty and formulation businesses. We continue to shift more MDI from components to systems. In the fourth quarter, we saw 17% year-over-year growth in volumes within our differentiated business.

While overall focus is to move as much tonnage downstream in our differentiated portfolio we benefited this past quarter from a continued spike in our component MDI. We said in our third quarter call that we believe we benefited by approximately $40 million of extra margin due to this temporary spike largely in China and Europe.

This continued into the fourth quarter with the industry facing shortages due to outages in geographical raw material constraints. We believe that the fourth quarter benefited by approximately $85 million due to these constraints. We believe that these one-off conditions will abate and margins will revert to more normal levels in coming quarters.

No one can accurately predict how this will play out. This will depend upon the absorption of the anticipated new industry capacity addition including our own. The status of outages and the resolution of raw material supply in certain regions. Even with all these capacities included supply and demand dynamics remain tight.

We expect that the industry will remain this way for the foreseeable future and believe that the growth that we have seen in our base business will be sustained moving forward. I reemphasize however, that we are focused on what we can control and we continue to move more of our business downstream.

We estimate that approximately 75% of our MDI urethanes are in derivatives and formulations. Looking at growth regionally, our North American volumes increased 16% as both commercial and residential construction markets drove demand in our composite wood products, adhesives and insulation sectors.

Demand is robust in this region and we expect to show a positive rate of year-on-year growth in MDI North America throughout 2018.

In our European region, MDI volumes increased 22% in the quarter as this region is benefiting from stronger demand in addition to our recent 60,000 kiloton, the bottleneck at our Rotterdam facility that started to come online in the third quarter of this past year.

We saw strong growth across all of our key European markets including excellent demand in our differentiated insulation systems business. India, the Middle East and Russia also saw double-digit growth in the quarter. As we start out in 2018 demand in Europe continues to be positive.

Asia volumes declined as we logistically balanced our production geographically in anticipation of our new facility in China coming online. Industry demand for MDI continues to grow at about 6% to 7% globally on an annual basis. As such industry capacity needs to expand at about 400,000 kilotons annually.

This is the equivalency of a world scale facility per year. As we stated this last quarter, we believe industry manufacturing capacity will grow to approximately 4% annually from 2016 to 2021. We believe we had good visibility over the next several years. Currently, we estimate that industry effective utilization rates are in excess of 95%.

We would expect short-term rates to fluctuate a bid as capacity additions are absorbed, raw material constraints are resolved and recent outages come back into the market. But overall, we see continued favorable supply and demand dynamics into the foreseeable future.

Now moving into 2018, our outlook remains positive despite our expectations for the short-term spike in margins to decline in our Asian European markets. Our Chinese MDI expansion, which has begun its start up phase, will begin contributing to EBITDA in 2018. We will bring capacity into the market as demand requires.

We expect MDI volume growth across our key regions and markets to continue in the 2018. We will remain strategically focused on growing our downstream and differentiated MDI formulation.

Putting it all together, we anticipate modest EBITDA growth in our MDI urethanes businesses in 2018 with year-over-year EBITDA growth being more in the first half of the year. Looking out to the first quarter of the year, we expect MDI demand to remain strong on a year-over-year basis.

While too early to know for sure, I suspect the short-term spike in margins will soften a bit and that the first quarter will look more or like the third quarter of last year. As we look beyond the first quarter, the remaining short-term spike in margins could soften a bit more as commodity component prices cool.

But this is subject to various stated assumptions, future operations problems may cost similar short-term spikes in pricing. To be clear, we see tight market conditions remaining for the foreseeable future.

Notwithstanding the near-term volatility in Asia and European MDI commodity component prices, we believe average 2018 prices for the region will be similar to 2017 prices. Lastly, for the quarter MTBE reported $3 million in the EBITDA, which is a modest improvement to the prior year period.

We'd like to be more optimistic that this business will show improvement in 2018, while we've seen a recent improvement in MTBE margins; we’re currently taking a conservative view and expect MTBE in 2018 to look similar to 2017. Let’s turn to Slide number 5 and discuss our Performance Products.

This segment reported EBITDA of $47 million in the quarter. This past year was a tale of two halves for our Performance Products segment. Beginning at 2017, we communicated that this business was poised to recover off a disappointing 2016 results.

We saw increased demand in improving industry dynamics in our key amines, surfactants, maleic anhydride businesses. As expected our earnings did see a nice improvement in the first half of the year. Heading into the second half of 2017, we continue to see an improvement in underlying trends in our key markets.

However, as reported in the last quarter, these positive trends were overshadowed by the significant impact of Hurricane Harvey. Because of Hurricane Harvey, our planned multi-year ethylene oxide turnaround at our largest performance products site in Port Neches, Texas was delayed to the fourth quarter.

We estimate the turnaround impact on the fourth quarter EBITDA to be $17 million. We also experienced weather-related in an unplanned outage that impacted us by an estimated additional $10 million. This largely affected our intermediates and surfactant businesses.

In spite of these difficulties, surfactant volumes were up 11% year-over-year excluding our European surfactant business sold in December of 2016. Our amines volumes increased 9% year-over-year and our maleic business saw a volume increase of 6% year-over-year.

As we enter into 2018, the underlying recovery in fundamentals in amines and surfactants remain and the issues that impacting our second half of last year are now behind us. We expect first quarter results to be moderately better than last year's first quarter, which would be a significant improvement over our fourth quarter results.

Our first quarter improvements are driven by our innovative pipeline as delivering new sales in growth markets. I'd like to flag that we have a planned maintenance turnaround in the second quarter of this year, which we estimate will impact EBITDA by about $15 million.

For the full-year, we expect performance products to deliver stronger EBITDA growth versus 2017 notwithstanding the impact of Hurricane Harvey. Let's turn to Slide number 6. Our Advanced Materials business reported EBITDA of $53 million. This business is focused on growing its core specialty businesses and specialty volumes increased 4% in the quarter.

EBITDA margins remained steady at 25% in our specialty business and 21% overall. The volume improvement was across all of our specialty markets. In addition to steady growth in aerospace, we continue to see positive trends in automotive composites and adhesives, specialty coatings and DIY consumer adhesives.

Wind and other commodity markets are currently adding nothing to our EBITDA and likely we will remain challenged. Let's turn to Slide number 7. We remain focused on growing our specialty high margin portfolio. This continues to be a great business with several positive megatrends. This business offers a good platform for future growth and development.

We recently acquired Nanocomp Technologies, which is the small technology acquisition, financial details of which we do not intend to disclose. A key component of the Advanced Materials growth strategy is to add formulations and technology to our portfolio that allow us to expand in our existing markets and to access new markets.

We can bring effects that our customers value and are willing to pay for. The Nanocomp acquisition brings technology and assets to manufacture and develop carbon nanotube base materials in various formats.

They can create a diverse range of valuable effects in composite materials and formulations such as radiative heating, electrical conductivity, toughening and corrosion prevention used in end used industries such as aerospace, automotive, and electrical power.

We believe that the integration of this technology within our Advanced Materials portfolio and potentially other Huntsman business platforms will create additional commercial growth opportunities for us going forward.

This acquisition primarily brings new technology that needs to be commercialized, as such we estimate that over the next year this business will not contribute additional EBITDA to rather add a modest expense while we integrate it and aggressively develop the optimal routes to market.

Looking at 2018, we expect Advanced Materials to see EBITDA growth in excess of GDP. Turn to Slide number 8. Our Textile Effects Division reported EBITDA of $19 million, up 36% versus the prior year. This business is growing at above market growth rates as total volumes were up 4% in the quarter and 7% for the full-year with key markets growing at 9%.

This marks our seventh straight quarter of volume improvement. We believe that this volume growth should continue for the foreseeable future as our portfolio of products addresses our customers growing need for sustainable solutions. The improved EBITDA in the quarter was driven by higher volume.

In addition to sustainability trends which continue to benefit this business because of our global geographic footprint, we are poised to take advantage of the trend of apparel retailers sourcing regionally for faster delivery times in shorter fashion cycles.

We remain confident that EBITDA will approach over $100 million in the next few years with EBITDA margins reaching mid-teens. Looking towards 2018, we expect consistent EBITDA growth as well as margin improvement. 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 9, our adjusted EBITDA increased to $360 million in the third quarter of 2017 compared to $204 million in the prior year period, pro forma for the sale of our European Surfactants business and the separation of our Pigments and Additives business.

The biggest driver for this year-over-year improvement in adjusted EBITDA was priced, which was only partially offset by higher direct costs.

While volumes were up in our core MDI Specialty Advanced Materials Maleic, Amines, and our Textile Effects businesses overall volumes were down as they were impacted by lower volumes in our upstream and intermediate products, largely MTBE, ethylene oxide and ethylene glycol.

Compared to the prior quarter, our adjusted EBITDA increased to $360 million from an adjusted $340 million. The $20 million sequential improvement in adjusted EBITDA was largely driven by price and the impact of Hurricane Harvey on the third quarter. Volumes were lower largely due to expected seasonality in the fourth quarter. Let’s turn to Slide 10.

We recently completed a successful follow-on offering of an additional 22% of our Venator shares, raising net proceeds of $513 million. We use these proceeds to pay in full $511 million of our term debt. We no longer have any secured term loans outstanding under our senior credit facilities.

During 2017, we repaid approximately $2.1 billion of debt with $1.7 billion of net proceeds from the separation of Venator and with approximately $400 million from our free cash flow. Our net debt leverage ratio as of year-end stands at 1.4 times well within investment grade credit metrics.

This compares to our net debt leverage last year of 3.4 times. Our year-end liquidity stood at above $1.2 billion. We have transformed our balance sheet and we enter 2018 with it being the strongest it has been in Huntsman's history. 2017 was another strong year for free cash flow.

We generated $594 million excluding Pigments and Additives which are shown as discontinued operations, well ahead of our shared expectations of greater than $450 million. Our free cash flow conversion rate for 2017 was a healthy 47%. In the fourth quarter, we generated $190 million of free cash flow.

In 2017, we had a use of networking capital of $133 million in support of expanded business and higher prices. I will remind you that in 2016 we achieved a material step change in our inventory management. We continue to make improvements in our inventory metrics. We spend approximately $280 million on net capital expenditures during 2017.

As previously reported, during the second quarter of 2017, we benefited from a $90 million tax refund relating to prior year periods. Pension contributions were higher in 2017 as planned. We have listed our free cash flow target range for upcoming years, including 2018 by $50 million to between $450 million and $650 million.

Looking into 2018, we expect to spend approximately $325 million on capital expenditures, in line with appreciation. We expect to maintain good working capital metrics in 2018.

I remind you that we typically see the first quarter of the year as a seasonal working capital bill in comparison to the fourth quarter where we see a seasonal release of working capital. We expect that cash interest will be approximately $110 million, nearly one half of what it was in 2016.

As we sit here today, we would expect pension contributions to be about the same to slightly higher and cash restructuring to be modestly less than in 2017.We do expect our cash spend in excess of amortization on maintenance and other to be higher in 2018 by more than $100 million, mostly due to the schedule multiyear maintenance turnaround occurring in the second quarter on our Port Neches, Texas facility.

In 2018, we will not repeat the benefit of $90 million tax refund like we did in 2017. Now turning to taxes, in quarter four 2017, our adjusted effective tax rate was 23%, effective January 1, 2018, the U.S. Tax Reform Act lowered the U.S. corporate tax rate from 35% to 21%.

Given the proportion of our global earnings made in the United States, we estimate the favorable impact on our overall long-term effective tax rate to be approximately 4%. We continue to evaluate many of the complexities of a new tax code as are all multinationals.

Based on the changes in the new tax code, we currently estimate our 2018 effective tax rate to be between 21% to 23%. Speaking further regarding our long-term effective tax rate, we had also have seen an increase in earnings global.

This increase in earnings in certain jurisdictions will allow us to access net operating losses previously deemed unusable by U.S. GAAP accounting. Consequently, we are assessing the release of a portion of tax valuation allowances later in 2018 related to Switzerland and to the UK.

In other words, later this year, we expect to be bringing back on balance sheet certain NOLs previously deemed unusable according to U.S. GAAP. While this required accounting treatment will not impact cash taxes in anyway, it will have an impact on our overall effective tax rate by a few percentage points.

Assuming these valuation adjustments are made later this year, our estimate of long-term effective tax post 2018 will be between 23% and 25%. Consistent with other U.S. based global companies, within the fourth quarter; we have recorded a few provisional tax adjustments relating to the new Tax Reform Act.

In the fourth quarter, we have recorded a provisional one-time non-tax benefit of approximately $137 million due to a remeasurement of net deferred tax liabilities at a lower new tax rate.

In addition in the fourth quarter, we have recorded a partially offsetting one-time provisional tax expense of $85 million due to transition tax on deemed repatriation of deferred foreign income. This will be paid over eight years.

Approximately $73 million of this $85 million transition tax is directly related to the gain on the separation of Venator. Now with respect to Venator, we presently hold the approximately 53% of Venator common stock. We intend to continue an orderly sell down of the shares subject to market conditions.

At today's market price, this equates to approximately $1.2 billion of gross value. At recent market prices, we estimate the total tax on the total Venator monetization to be between $170 million to $200 million. Of this we have incurred approximately $35 million in the fourth quarter of 2017.

Approximately one half of the remaining Venator taxes will be spread over eight years as part of the transition taxes under the new tax code. I would like to remind you that we show Venator as held-for-sale on our balance sheet and in discontinued operations on the income statement.

The minority interest of $532 million relating to Venator on our balance sheet will be removed once our ownership in Venator falls below 50%. In summary, we have achieved investment grade credit metrics. Our balance sheet has never been stronger. We have consistent free cash flow. The effect of the new U.S. tax code is a modest positive.

As we move forward, we are focused on a sensible use of our capital. I will now turn the time back over to Peter for concluding comments..

Thank you, Sean. Let’s turn to Slides 11 and 12. We close out 2017 with a strong EBITDA of $1.260 billion and strong cash generation from both our operations as well as partially monetizing our ownership of Venator equity. At this time, as we look out to 2018, we see our four divisions each earning more than they did in 2017.

In 2017 cash flow generation was about $600 million. I believe this next year; we should be in the range of $450 million to $650 million. As Sean reported, our debt-to-equity ratio is now at 1.4 times. We will continue to prioritize and maintain a strong balance sheet that will allow us to focus on four priorities.

Number one, we will continue to invest in our organic growth as we improve our reliability and bring new capacity in products into the marketplace. Number two, we will seek out acquisitions that will allow us to expand our downstream margins deliver consistent earnings and grow the business at stronger than GDP rate.

These acquisitions will be focused primarily on our downstream MDI epoxy, amines and surfactants businesses. When pursuing these acquisition opportunities, we will remain committed to maintaining long-term investment grade metrics. Three, returning cash to shareholders. Our board recently approved a 30% increase in our dividend shareholders.

We think this brings us in line with our industry peers and again preserves our strong balance sheet in credit profile. Our board of directors also authorized the repurchase of up to $450 million in stock. This will be done at a value and at a pace of our choosing, but we will not jeopardize our balance sheet.

The four, as opportunities avail themselves, we'll continue to monetize our equity in Venator subject to market conditions. I hope we can complete this year.

May 23, we will be hosting an Investor Day where in each of our divisional presidents will join me in presenting our view of the business going forward as well as more details of the objectives I’ve just set out. On a personal note, earlier this month, my father passed away.

He will be sorely missed by his family of over 15,000 associates in Huntsman Corporation and Venator. I speak on behalf of all of our associates in recognizing his vision, his faith in humanity, and deep love for this industry.

As I’ve said in an earlier release, dad didn't know much about molecular chemistry, but I know a few people who come close to his knowledge of human chemistry. We lost the great one. 2017 was a great year in spite of historic storm impacting our earnings, 2018 looks even better.

With that, operator will you explain the procedure for Q&A, and let’s open the line up for questions..

[Operator Instructions] So your first question comes from the line of Frank Mitsch from Wells Fargo. Your line is now open. Please go ahead..

Yes. Good morning, and my condolences to you and your family, and I totally agree we did lose a great one..

Thank you very much Frank..

Peter, you mentioned you view or your vision on doing some M&A or looking at M&A. How are you looking at multiples right now and I mean – because we’ve heard from other people that multiples tend to be on high side.

And so from your perspective, how likely is it that Huntsman will pursue some M&A in 2018?.

Well, I think that we are looking at a number of projects before us right now. I would characterize these, Frank more is bolt-on acquisitions. Now that obviously can change depending on what’s out there and what comes available.

But I would – I think it would be very difficult for us to find and justify an acquisition that did not have some element of integration to it. I think that when we look at some of these double-digit multiples that are being paid particularly by some strategic – particularly by private equity.

I think we've worked too hard to get a balance sheet where it is.

And I think that in the past, I think we've been very successful in buying and integrating smaller bolt-on acquisitions I think with a stronger balance sheet will expand the target, will expand what we'd be the size of those target, but I think that we need to continue to be very balanced in that approach..

That’s very helpful. And if I could ask a question on the businesses, very impressive amines and maleic anhydride volume growth in the quarter.

Where are your operating rates? How much more can we see happen in those businesses?.

In our Maleic businesses, I'd say that we're operating in the low 90's, low-to-mid 90's. Amines we’ve got more capacity there. And I think that as we look throughout the year in our Amines businesses, we do have room to not only grow that volume metrically, but also to upgrade that business.

And I think that where we've been over the last couple of years is as I look at our businesses today and throughout 2018 in our performance products, I kind of look at the big three if you will between amines, surfactants, and maleic. I think the opportunity for best growth here is going to be in the amines area..

All right. Thank you so much..

Thank you..

So next question comes from the line of Kevin McCarthy of Vertical Research. Your line is now open. Please go ahead..

Yes, good morning. I appreciate the detail you’ve included on Slide 4 regarding MDI.

Peter, I was wondering if you could comment on how much price you’ve been able to achieve in MDI systems specifically and to the extent that you have been able to raise price there? What is your degree of confidence that you can hang on to that when and if component MDI prices regress?.

Well, I think that Slide number 4, we've put a lot of thought into this one as to what is really reflected here as what we would consider to be our base EBITDA business, what we would say would be the tightening when we talk about the tight market conditions on Slide number 4.

I would say that those are price increases that we've been able to achieve really through two means. One, targeting higher end value-added applications in customers and also because the industry is operating in the low 90 percentile utilization.

I think that we've also tried to be very clear into how much we think this is – how much of this is kind of the commoditized components. And I want to be clear, I don't look at all components as being commodity, but there certainly is a majority of the component business that’s out there that I would characterize as more commodity than not.

How much of that is – really what I would consider to be the short-term spike. And so if you look at the third quarter, looking to the fourth quarter kind of a $40 million benefit in the fourth quarter, $85 million benefit in the fourth quarter that what we show on the red bars on Slide number 4.

I expect that we will keep that on a longer term basis, quarter-in quarter-out may not be exactly flat. Again there are variables about operating conditions and how much people bring into the market and starting up a facility that are now shut down. But I would expect us to certainly maintain and keep the majority of that red section..

And then as a follow-up, if I focus on that gray bar of $85 million in the fourth quarter, is all of that component MDI or do you have anything else in there?.

Yes, I would think that 95% plus of that, I don't want category, to say 100%, certainly the vast majority of that would be component MDI and would be MDI business that I would assume that I think it's safe to assume that I look at that as being kind of more spot oriented business or businesses where you would have and end use application where competitors can take the business kind of just over pricing.

And of course that's the business longer-term that we want to be kind of slowly pulling away from and being able to have either a formulation or downstream systems or a longer-term contract or longer-term price type of a contract. But that's why that business is largely Asian centric at this time..

Okay. Thank you very much..

Next question is from the line of Hassan Ahmed of Alembic Global. Your line is now open. Please go ahead..

Good morning, Peter..

Hello, Hassan..

Deepest condolences about your dad, definitely lost amazing gentleman..

Well, thank you, Hassan. I know he would be thought the world of you and enjoyed his relationship with you over the years as well..

Always loved his company. Peter, question about the sustainability of MDI margins. Obviously, we've seen some outages in the industry, some incremental capacity coming online.

But as I sort of reflect on 2017, particularly in the Middle East and Saudi Arabia, we saw incremental MDI supply come online and it seems it was very, very quickly digested by the market and pricing actually didn't even negatively react to that, which to me suggests that demand continues to be very strong.

Now you talked about maybe some hiccups along the way in 2018 because of sort of incremental supply, some of the facilities that have underwent outages and then coming back.

But is it possible that we see a repeat of 2017 and 2018 again just because of call it above trend MDI demand?.

Well, I would – certainly if you see major outages in the industry and what we don't know is the – how much capacity is truly coming out of the Middle East that it would appear just by reading public information that the new Middle East capacity is running probably in excess of 80% capacity.

That's a lot of new volume that's come into the market and I'm not prepared to say that we haven't seen any impact of that coming into the market, but I think as you kind of think about how much capacity has been taken off during the fourth quarter? How much has been added on during the fourth quarter? I think there's probably a fairly close balancing act here and I think over the course if I was to just express candidly an uncertainty over the first quarter is that $80 million, $85 million we show on Slide number 4.

I said earlier in my comments that that we think that that softens. The question is to what degree that softens and how soon that softened and that's going to be and a fact is to how much capacity comes into the market, the startups that that will becoming into the market and how that overall impacts the market.

But I think you hit on a good point there Hassan that throughout 2018 MDI plants as you go back over the last four or five years, it's not unusual, but in any given point you have a world scale facility that is down and the scale that we're seeing built today these facilities of around 400,000 tons facilities, you all of a sudden see a market go from 91% to 96%, 97% capacity utilization almost overnight and that will affect prices and I think to that I'm not good say that’s that could well be the new norm.

But as I look at over the last couple of years, it seems as though there's kind of on average a world scale facility that’s either going down, coming up or shutdown for some unplanned problem so..

Understood, understood. Now changing gears a bit, on the raw material side of things, how are you guys thinking about 2018 from a raw material sort of cost inflation perspective? I mean obviously we've seen some spikes in methanol pricing, ethane continues to be sort of relatively oversupplied, relatively cheap.

Benzene it seems hasn’t really played catch up with crude oil.

So how are you guys thinking about raw material cost inflation or last year or also in 2018 relative to 2017?.

I think a lot of that is going to depend on the crude markets. I think that the crude markets probably in my opinion and I'm certainly not an expert in the field, but my opinion I think that crude is probably a bit overheated right now. When you look at how much new capacity is coming into the market of crude production, fracking and so forth.

And I think that when you look at the derivative of benzene in a number of other products that are kind of the crude oil derivative not really reflecting a full some price in the mid-60s.

I would tell just kind of would tell me just anecdotally that the crude and the derivative markets probably don't believe that these are sustainable crude prices either. So as I look out into 2018, I'm not sure that – we're not expecting a big fly up in benzene and a number of our raw material. I think we'll see the average typical cyclicality.

The typical arbitrage remains between an oversupply in Asia and undersupply in North America. We will see price movements in those areas, but I don't see something that materially would impact the business..

Very helpful, Peter. Thanks so much..

Thank you..

Next question comes from the line of Jeff Zekauskas of JPMorgan. Your line is open. Please go ahead..

Thanks very much.

What was your cash flow from operations for 2017 conclusive of discontinued operations?.

So the discontinued operations piece in 2017 would be $377 million..

$377 million, okay. I know your taxes are quite complicated, but if you could exclude Venator for a moment.

The modernization of Venator, what was your cash tax rate in 2017 and what do you think your cash tax rate will be in 2018?.

So we believe going forward here, Jeff that that rate would be approximately 20% to 22%, and in 2017 it was probably a little bit lighter than that..

So a little bit lighter than that.

So your cash taxes are actually going up a little bit?.

View is yes..

Yes.

Lastly, are there any areas where you need new capacity and how much would it cost to get that capacity?.

I'm just not a big fan of new organic capacity.

I mean I'm just seeing across the board, I mean we've obviously got MDI coming on in China and that's going to be – I think it will be over the next 12 to 18 months that we absorb that, and we will absorbing it as the grades and as the market – as the grades are able to be producing as the market's able to absorb that.

But as I think about the other facilities, I mean I think we've got some room for some minor debottlenecks in our maleic business, and our surfactants and amines I think we've got some excess capacity in our tax dollars effects, in our Advanced Materials.

As you know from the last couple of years, we've been freeing up capacity I'd say on the commodity side of the business. I think we've got plenty of excess capacity to supply the aerospace industry. We actually, the last time we expanded our Advanced Materials businesses.

I think we expanded going out to about 2025 as far as what we were expecting the demand to be from the aerospace industry on the 777, 787, and 350 platforms, 380 platform. So as I look across the board, I think that I don't really see a need to go out and be spending money to build new grassroots facilities.

Again, I think that I'd like to see some capacity creep coming along at GDP sort of rates, but I just don't see and need it to go out and build a lot of new capacity here..

Okay. Great. Thank you so much..

Thank you..

Okay. So, next question comes from the line of Michael Sison of KeyBanc. Your line is open. Please go ahead..

Hey guys. Nice end of the year. Peter, I thought you mentioned that you felt each of the segments could grow EBITDA this year and in 2018 versus 2017 and given how strong you had the short-term spike margins for MDI.

Can you maybe frame up the type of growth you could do in polyurethanes in 2018 versus 2017?.

Yes, I think that when we look at our base EBITDA and that red line again going back to Slide 4. I think that we're going to see that being maintained and expand throughout the year.

And I think that as we look at the what I would consider to be our short-term spike, we'll see kind of a reversal in the early part of the year, the benefit of that spike in the early part of the year, and the second half of the year we would see our earnings mostly what I’d consider to be our base EBITDA and our growing EBITDA which would be that red section.

So I think when you average out the two years, you're going to see pretty similar pricing, but throughout the year I'd say that you'll also see an additional line building up throughout 2018 on Slide 4 which is the Chinese capacity.

Is that comes into the market? It will expand as you saw – as we saw this last quarter year-over-year at 16% growth overall in the Americas. That's a lot of product that used to be going to Asia that’s coming back into the Americas. There's a very strong demand right now in North America.

We've been able to place a lot of new tons and to expand with our customers in that area.

So I think we're going to see some repositioning were MDI that used to go from North America to China will stay onshore, Europe will stay onshore, and China and Greater Asia not just China, but that whole Greater Asia market, will be supplied as we take on another 200,000 tons of capacity over the next year or so..

Okay. Great. And then I was impressed with the other bar chart which showed 16% and 17% growth in the high value differentiated business.

Can you maybe walk us through what – where that growth is coming from and is that a similar type of growth that we could see in the next couple quarters into 2018?.

Well, I think a lot of that as we look the year-over-year sort of a growth taking place, the CWP, the composite wood construction market continue to be strong for us. We continue to see strong growth in automotive both in Europe and in Asia rather flat in the Americas, but Europe and Asia most parts of the world.

Our ACE businesses, particularly in Europe continue to do very well. That’s the adhesives and coatings and elastomers businesses. And then our insulation business, we continue to see strong growth in Europe and in the Americas, certainly stronger than GDP growth in the Americas, double-digit growth in Europe.

So that’s why I say it looks really broad based as I look across the board, and I look in areas like construction, the insulation markets. We’ve made very little penetration relative to the size of those industries as I look in the composite wood as I look in a lot of the automotive applications and so forth.

There really is polyurethanes and MDI in particular, as we look at these downstream segments. MDI is a great chemistry to be able to build on and to be able to take that chemistry to move it aggressively downstream. That certainly is going to be one of our larger focuses here..

Great. Thank you..

Thank you..

Next question is from the line of Laurence Alexander of Jefferies. Your line is open. Please go ahead..

Hi, guys. This is Dan Rizzo on for Laurence.

How are you?.

I am well.

How are you Dan?.

Good.

Could you guys tell me, did you guys go over your turnaround schedules since 2018, 2019 which you are expecting?.

We have not 2019, but as we look in 2018 the guidance that we gave was in the second quarter that would be in our Port Neches facility in Texas, you should expect about $15 million cost on that and that should all be contained within that quarter..

And that's the only thing?.

That's the only thing. And as we look throughout 2018, yes that would be what I obviously think would be the only material turnaround that we have..

Okay.

And then have you talked about potential cash repatriation that you have to do that you're thinking about doing just with new tax code?.

No, what happens there is that we have a deemed repatriation tax write upfront and that was something I mentioned earlier that we basically take an expense today one-time of $85 million bucks, $73 million of that's related to Venator. So that's something we take upfront.

So the good news there is that as we bring cash back over time, if you will that's been already taken into consideration in terms of the P&L. And in terms of bringing cash back that's – we will have some elements of local taxes that will pay cash taxes on for example, if we repatriate from China or India things like that.

There will be some local taxes paid there, but the U.S. tax is pretty much taken care of on a book basis by picking this upfront tax here..

Thank you very much..

And the next question comes from the line of Bob Koort of Goldman Sachs. Your line is open. Please go ahead..

Thank you. Good morning..

Good morning, Bob..

Peter, I appreciate the candor on the segments in MDI and some of this potential over earnings in the short run. Trying to calibrate that a little better, so we can figure out what might happen in 3, 6, 12 months out. Can you give me a sense I think even the past talked about the component business having normalize or typical EBITDA margin of 10%.

Give us a sense of where that might be today?.

Yes, as we look at that today, it is probably again depending on the region and depending on the application. You're probably looking in some of these is being in excess of 20%.

But again sometimes you haven’t – we look at the components as being kind of this monolithic product that sells kind of it all commodity or not commodity in all one price, not one price.

So I think again as I look at it is more is to where do you have customers down – where do you have MDI customers, but those customers are vulnerable and they're just price buyers and I want they all of them are priced buyers. But what do you have a more commoditize component business.

So today I would say that that's around 20% on average, and that's I say that typically we've said in the past, it’s around 10% normally and I’d say that’s – those are pounds that eventually would like to be moving further downstream into formulation applications..

And on MDI, it seems like Covestro and some others have talked about how it takes quite a while to get these facilities ramped up? Can you give us some sense on your own plant in China that expansion there? What your cadence of introduction, you mentioned obviously you do it diligently into the market? But if things stayed as good as they are how quickly could you bring and ramp that capacity up..

Well, I think typically when we look at ramping up of facility, assuming you don't have mechanical issues. I mean look at our own experience with our own technology and our own MDI plant that today I'm obviously biased and saying if I think our plant Caojing today is one of the most reliable finest MDI facilities operating in the world.

But it took us over a year to start that facility up. There were some mechanical issues and some – it was a 14-month process. Now I look at the Caojing 2 the present facility, we do have product coming out of that that is going to customers today and – but we are going through a gradual startup process.

Making sure that is as you go through these things that can be damaging the equipment in that you're going to be able to produce a non-spec product.

So I would think that typically a six-month to nine-month sort of a process, thinking that we are quite kind of started at the first of the year and I think that six to nine months out if for some reason you could sell the plant out. You're not going to do it the next six months..

Got it. That’s helpful. Thank you..

Thank you..

Okay. Next question comes from the line of Aleksey Yefremov of Instinet. Your line is now open. Please go ahead..

Thank you. This is [indiscernible] for Aleksey.

Just following up with ramp of MDI, how quickly do you think debottleneck in Europe can be filled?.

It’s still right now and it's filled out right now..

Okay, all right. Perfect..

And that’s why in Europe we’re looking at a 22% year-over-year that's not just because markets are necessarily strong. Markets are better than they were a year-ago, but we’ve also got more capacity..

Got it. Thank you.

And then with the buyback announce this morning, is there any stipulation on the timing and would the board be able to kind of up that amount once Venator has been monetized?.

I think that the board will always be open to ideas and suggestions. I think we've got a board that’s very focused on a strong balance sheet and will remain so. I think though that as we look at that typically in our industry, I think and again, I don't want to say that this is exactly what we're doing typically in our industry.

You're buying in about 2% of your equity value, [indiscernible] something, $150 million a year, a portion of that is going to be kind of on a quarterly basis, looking your weighted average price per share.

And then the other parts probably going to be buying a little bit more per quarter at hopefully a lower price than in a higher price and all that all sounds rather nebulous, but I think that we'd be looking at some element of that.

It's going to kind of be a program purchased and another element of that that's going to be somewhat on a – I would say speculative purchase, but perhaps opportunistic purchase. But I think that when we look at that $450 million, I would expect that could be spread out over a multi-year period..

Got it. Thank you..

Thank you..

Next question comes from the line of P.J. Juvekar from Citi. Your line is open. Please go ahead..

Hi. This is Eric Petrie on for P.J. could you remind us the EBITDA benefit from Rotterdam and China MDI expansion? And then Peter, you noted that U.S. MDI volumes to China are expected to decline.

Could you give any quantification of the $125 million benefit that trade arbitrage played into?.

Yes. I'm a bit lost as much as the trade arbitrage played into the $125 million benefit. .

Yes. Did you realize any benefit from shipping from the U.S.

and Europe to China and could that contributes to the $125 million?.

No. I think no. I wouldn't say that there's any arbitrage to be played on that. That should kind of just be considered flat. We haven't really – I don't think that we necessarily look at how much EBITDA is generated by an expansion per se. If all of those pounds were being sold at the same price, same margin I think that would be apropos.

But we produced a lot of that MDI that then some of it sold directly to pure MDI, some of it goes into components, some of it goes into the formulation. I think that we kind of look at that as just being part of a rising tide rather than a specific number that we've broken out on the P&L. So I guess a crafty way of saying I don't know..

Okay.

So you aren’t pulling out commodity grade and reducing differentiated, take advantage of the short-term opportunity?.

No. I mean if anything we've got excess splitting capacity with an expansion we did earlier last year and this just allows us to add more tons to be able to take in and actually address some of the more specialty side..

Okay. Helpful.

And as a follow-up on epoxy, could you give us any update on your outlook for utilization rates in 2018 versus last year and I think trend versus raw material inflation?.

I used to be – if we used to follow capacity utilization when we were producing more BLR, more commoditized grades of epoxy. To be honest here, I don't even follow those anymore. We've shut down so much of our basic capacity in our BLR business and most of what we have remaining is all captive.

And as I said earlier, we've got units that are selling – products that are selling at 20%, 25% margins were the units operating at 30% capacity. So I'd like to think that we've got products out there that are not capacity impacted, but rather our value on formulation and molecular composition rather than how much capacity is out there..

Great. Thank you, Peter..

Thank you..

Next question is from the line of Jim Sheehan of SunTrust. Your line is open. Please go ahead..

Peter, thanks for your updated thoughts on M&A.

In the context of your desire to have an investment grade rating? Is it fair to say that large scale M&A is pretty much off the table?.

Well, I would never say never, I am my father son. So as you look at that I think that a lot of it is opportunity based.

If we saw another deal that look like the recent merger that that I think over a long-term would have added a great deal of value, I look at acquisitions that are truly transformed this company like the Texaco Chemical, epoxy business, the ICI business. Yes, but I think those come along every once a decade sort of thing.

I think that by and large sale that we're looking at and maintaining a strong balance sheet and I think it is our equity value improves. We want to be able to look at that as a currency.

Look at new debt as a currency and so and I'd also just know that when I think of maintaining a long-term balancing typical as you have an acquisition and you have a rate – you have a router or means to kind of return within a year or two or so.

Back to what I would consider to be investment grade metrics, I don't think that that necessarily killed anything. But we want to maintain that, but look that's not going to run our long-term strategy either. We're here to create value and to create shareholder value..

What you're thinking on the timing of an investment grade rating?.

Well, I think that we've been investment grade company for some months now. That's not up to me. I think that we're already there and I see no reason why I wouldn't be an investment grade company. But again that's not my decision..

And how did cold weather impact your businesses on the U.S.

Gulf Coast in January or any impacts that we should know about for first quarter?.

No, nothing that done – nothing that we've seen, maybe a few million here and there are capacities were idle, but w didn’t see any long-term closures or damage that was done..

Thank you..

Thank you..

Next question is from the line of Matthew Blair of Tudor, Pickering, Holt. Your line is open. Please go ahead..

Good morning. Peter, I was intrigued by your comment that you're looking at M&A in amines. When we think of Huntsman and amines, we think of very strong market share already.

So I guess could you talk about what would be your strategy here, is it simply to get bigger in the space or are you looking to upgrade your existing production? Any comments there would be helpful..

I think both, but largely to upgrade I'd like to see is go further downstream. I think that as we look at in some of the fast growing areas around agricultural chemicals around the oilfield services and so forth. I think when I talk about amines. It's not just adding more amines capacity, but more amines capability downstream consumption.

I would like to take our molecules, our EO molecules. PO that are going into amines and move those further downstream. So I’d say there is a little bit of opportunity that we see to widen and expand the capacity, but mostly I'd like to focus on downstream integration and using those molecule further downstream..

Got it. Thank you. And then on MDI, so in 2017 there are a lot of unplanned outages that really grabbed a lot of headlines, but there's also a fair amount of planned activity.

Do you have a sense industry-wide what planned MDI turnarounds look like in 2018 compared to 2017?.

No, I'd say that on – MDI facilities typically go down once a year when you look at the maintenance and so forth. It's not very often that you find an MDI plant that goes four years without any closures. And so I think that what you’ve seen in the past as far as planned outages, I even would imagine that's probably going to continue.

We've seen a pretty consistent operating rate over the last couple of years that way..

Thank you..

Thank you. We'll take one or two more questions. We usually try to end at the top of the hour, but since we went on so long about taxes. We’ll take another question or two and then wrap it up here..

Okay. We have another question from the line of John Roberts of UBS. Your line is open. Please go ahead..

Sorry about your father as well, Peter..

John, thank you very much..

And I’ll ask just one question.

If you could have all of your component in MDI business used internally in systems, would you go that far or do you structurally kind of always want to have a presence or intelligence about what's going on in the component market?.

I think that our objective is not that – I want to be clear, it's not that components are good or bad. If we could structure components and we have these today particularly in North America around our OSB businesses where you've got long-term contracts with price escalators or de-escalators.

And that's why you've heard me say that we've looked at volatility of component pricing in Asia and Europe.

I've not mentioned anything about components in North America, much of our component sales in North America are larger volume, longer-term businesses where we've given up perhaps some of that upside margin to make sure that we've got long-term consistent earnings.

And so I wouldn't say that we want all of our – and those large volume accounts help base load facilities and frankly it's good business. So I wouldn't want to say that we see a day when we'll be completely out of the components market.

I would hope that we can see a day where we have taken what I would consider to be the commoditized end of that component business, and we've upgraded that either to higher value-added component longer-term stable contracts or we've somehow derivatized that by formulating it, putting into a system house and blending it with something else of value..

Great. Thank you..

Thank you. End of Q&A.

And I think operator that pretty much takes up our time here..

So thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day..