(Updates with closing share price in sixth paragraph.)
Nov. 2 (Bloomberg) -- Huntsman Corp. Chief Executive Officer Peter Huntsman said the chemical maker is selling into balanced markets, setting the stage for higher profit and potential shortages when global economies improve.
“We are tight today in most of our products, and when I look into 2012, ‘13, I don’t see a lot of new capacity coming into our business for the products we produce,” Huntsman said today in a telephone interview. “You’ll see tighter and tighter capacity utilization and, under that scenario, a gradual improvement in earnings.”
U.S. home construction, for instance, has scarcely improved since the start of the recession, hurting demand for polyurethane, which is used to make insulation and foam cushioning, he said. An improvement in home building could tighten polyurethane-plant operating rates 3 or 4 percentage points and add $500 million to annual earnings before interest, taxes, depreciation and amortization, he said.
“If home construction doubles, I question if there are enough chemicals out there that go into home building, that go into furnishing homes,” Huntsman said. “People have recalibrated their capacities around today’s global economic environment.”
The company today posted a third-quarter net loss of $34 million, or 14 cents a share, compared with net income of $55 million, or 23 cents, a year earlier. Excluding costs to eliminate jobs and other one-time expenses, profit was 45 cents a share, Huntsman said. That tops the 43-cent average of seven analysts’ estimates compiled by Bloomberg.
Huntsman, based in The Woodlands, Texas, rose 15 percent to $12.59 at the close in New York, the biggest gain since Aug. 9. The shares have declined 19 percent this year.
Sales and adjusted earnings for the year are poised to set a company record, the CEO said in the earnings statement.
“Here we are at a time of continued economic sluggishness where we’ve seen very little growth, and here is Huntsman having a record year,” Peter Huntsman said in the interview. “The chemical industry is fairly balanced with an economy that in North America is still dragging.”
Titanium dioxide, a white pigment used to add opacity to paint, also is poised to benefit from more home construction, Huntsman said. The company, already running TiO2 plants at full capacity, achieved about half of a proposed $450 per ton price increase so far in the fourth quarter, Huntsman said. Third- quarter prices averaged $3,650 a ton, Chief Financial Officer J. Kimo Esplin said today on a conference call to discuss the earnings.
Price gains will allow Huntsman to recoup costs for titanium ore that could double in 2012 to $1,200 or $1,300 per ton of TiO2 production, Esplin said in a telephone interview.
--Editors: Steven Frank, Jessica Resnick-Ault.
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