Huntsman Corporation (HUN): a chemical company bounces back
Based in Woodland, Texas, Huntsman Corporation (NYSE: HUN) is a multinational corporation that manufactures and markets a variety of chemical products for consumer and industrial use. Their specialty lies in manufacturing assorted polyurethanes, adhesives, and even performance products. Their market is robust, serving as the preferred chemical manufacturing company for specialty products from major companies like BMW, Proctor & Gamble (NYSE: PG) and Chevron (NYSE: CVX). The company is home to more than 70 research and development facilities in 30 countries around the world. Founded in 1970, the company has now reached great heights, becoming the world’s largest white and color pigment company, as well as the fifth largest manufacturer of insulators.
In this article, I will show that despite a tough 2020, Huntsman has shown signs of positive value lately. The pandemic has been difficult for nearly every business, but Huntsman is showing signs of a rebound year. With the expected rise in the chemicals market in tandem with Huntsman’s improving finances, the company will prove to be a slower, but steady investment.
Huntsman’s Diversified Portfolio Maintains Company Value
The company has a diverse manufacturing portfolio. They have a very versatile list of chemicals they manufacture and their uses vary widely. With the market, partnerships, and pipeline so different for the four, it behooves investors to dissect each category to look for strengths, weaknesses, and overall value. The first category is that of polyurethanes.
Polyurethanes are by far Huntsman’s main manufacturing chemical subtype. These chemicals are used in various items including spray foam insulation. Since insulation is one of the primary products manufactured and sold by Huntsman, it makes sense that the most critical chemical property is manufactured in-house. Polyurethanes produced by Huntsman are also used in automotive seats, which has led to lucrative contracts with other companies like BMW that use chemicals to make seats for their automobiles. These chemicals are also used in other manufacturing, from shoes to adhesives, making them very versatile and lucrative. The manufacture and sale of polyurethanes represents nearly 60% of all Huntsman revenues.
The second major revenue generator for Huntsman Corporation is what is known as “performance products”. These are products made and designed for specific purposes for specific industries. One of the biggest sellers in this category is agricultural chemicals. These are chemicals used in agriculture and cultivation and can include anything from specialty growth chemicals to pesticides – another form of performance chemicals used in oilfield maintenance and production. Oil is a big seller here in the United States, and any chemicals designed to help equipment recover black gold from the ground have market value and longevity. In total, performance products account for 17% of revenue generated by Huntsman products.
Another slightly more ambiguous sales category for Huntsman products is Advanced Materials. Advanced Materials has a wide array of diverse products attributed to its title. Perhaps most notable is the electrical insulation. It is a common construction product and likely to have a large market, and deservedly generates a large number of sales. Another less common but probably more lucrative sales sub-category is aerospace products. Anything that helps airplanes fly or can be used on objects launched into space is usually nuanced and thus creates value. Advanced materials represent 12% of the company’s turnover.
The final sales category of Huntsman’s income is textile effects. It is not uncommon for chemical companies to be associated with textiles. This industry covers everything from sports and formal wear to home furnishings. Clothing is a big seller, so having Huntsman associated in the sales arena with this type of item is once again good for sales and good for longevity. While representing the smallest percentage of revenue from the company’s offerings, textile effects still account for 10% of sales.
Huntsman has made serious progress by investing in a brand new production facility in Conroe, Texas. The plant, which is expected to start generating revenue as early as next year, is designed to manufacture a revolutionary new chemical known as ultra-pure ethylene carbonate. This chemical boosts the operating voltage of the new wave of lithium-ion batteries, which power electric cars. With responsibility for environmental safety and moving away from fossil fuels, this could be a game-changer and a significant investment in the future. Involvement in the lithium-ion battery market for electric vehicles could prove extremely lucrative for Huntsman due to the massive growth expected in the coming years. According to recent projections, the global electric vehicle market size is expected to reach over $154.9 billion by 2028 – translating into a (OTC: CAGR) by 28.1% over a seven-year period beginning in 2021. With the innovations seen in Huntsman’s new ultra-pure ethylene carbonate chemical, it’s not hard to imagine the possible profitability coming year if their new Conroe plant becomes a vital part of the global electricity market. vehicle supply chain.
Huntsman Corp suffered a revenue loss in 2020, marking the third of four years they have seen a decline in revenue. Eventually, however, things could turn around. As supply chain issues begin to resolve and basic demand for chemicals increases, Huntsman recorded its first significant revenue increase since 2018. With reported revenue of $7.8 billion in 2021 , the company appears to be on track to expand its reach into the chemicals business. Marlet.
On the other hand, net profit saw its biggest increase in the past four years in 2020. The company reported net profit of just over $1 billion in 2020, nearly double its 2019 figure of $562,000,000. While it may seem strange at first glance that in a year that has seen its revenues plummet, it has also seen net income generated in record numbers, it is essential to understand precisely how Huntsman Corporation earns a lot of silver. This method comes in practice from buying and selling various other businesses which instead show up on the cash report as income from “other investing activities”. Within this category, Huntsman Corp posted a valuation of $1.7 billion.
A company gradually paying down its debt is a sign of a company on the right track, which should make investors a bit more optimistic. Huntsman Corporation holds long-term debt of $1.5 billion, which is quite a large number, but also down significantly from the $2.2 billion of that debt in 2018. Their total liabilities are to just under $5 billion, down significantly from 2017 when Huntsman was saddled with $7.6 billion in debt. The company also holds a $1.5 billion surplus, which will no doubt be used to pay off more of this debt in the future, proving that the current investment has been at least moderately profitable. .
Granted, there’s not much to cheer about Huntsman Corporations past finances. While they have increased their net income and paid off some of their debt, their income has been declining for a few years. Any reason to invest in Huntsman Corporation must be born out of a long-term view. That said, their sudden increase in revenue, combined with their innovative new battery technology and the opening of a manufacturing facility for this battery formula, presents an opportunity for future gains for investors. The future finally appears to be looking up for Huntsman – the company is expected to grow revenue and benefit from cleaner margins on the balance sheet. With the expected increase in the chemical market, Huntsman will prove to be a solid investment. All of these factors should signal to potential investors that there are plenty of opportunities on the horizon to build a long-term position, but the current price may be too high to warrant immediate investment – investors looking to enter may want to wait a decline. or a short-term correction.