Greetings. Welcome to the Huntsman Corporation third quarter 2023 earnings call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, I would like to hand the call over to Ivan Marcuse, Vice President of Investor Relations and Corporate Development. Thank you. You may begin. Thank you, Daryl. Good morning, everyone. Welcome to Huntsman's third quarter 2023 earnings call. Joining us on the call today are Peter Huntsman, Chairman, CEO, and President, and Phil Lister, Executive Vice President and CFO. Yesterday, October 31st, 2023, after the U.S. equity markets closed, we released our earnings for the third quarter 2023 via press release and posted to our website, huntsman.com. We also posted a set of slides and detailed commentary discussing the third quarter on our website. Peter Huntsman will provide some opening comments shortly. We will then move into the question and answer session for the remainder of the call. During the call, let me remind you that 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. Be sure to 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 EBITDA, adjusted net income or loss, and free cash flow. We can find reconciliations to the most directly comparable GAAP financial measures in our earnings release, which has been posted to our website, huntsman.com. I'll now turn the call over to Peter Huntsman. Ivan, thank you very much, and thank you all for taking the time to join us this morning. This past week, I had the opportunity to visit one of our largest aerospace customers with our board of directors. We watched firsthand as Huntsman's composite raw materials were applied to some of the most fuel-efficient and modern aircraft built anywhere in the world today. We also visited one of our plants that is making Germany's premier sports cars lighter and consume less electricity. We spoke to our associates at this same plant, who are responsible for making components for a smarter, more reliable power distribution and grid system. I'd go on about the numerous applications that Huntsman is now producing to serve a less energy-intensive, but more energy-reliant economy. All of this gives me cause for optimism, and it's a great reminder about our company's position in the global marketplace. Over the past 24 months, we've seen some of the strongest economic performance as we recovered from a global pandemic, and subsequently, among the most chaotic economic conditions as European energy policy seemingly collapsed. China's bounce back stumbled along, and North America's construction markets took a beating over high interest rates and consumer uncertainty. As we now have some visibility into the beginning of the fourth quarter, as I said during our last earnings call, we expect this to be a tough quarter, depending on the amount of customer de-inventorying we see and lack of consumer confidence. Our projections for the fourth quarter remain murky, as the real year-end seasonality does not yet start for a couple more weeks. However, our customer and plant visits demonstrate just how vital our products are in an evolving global economy. We continue to see the recovery of the aerospace industry. In all of our other divisions, we will be a vital supplier to both the EV and ICE automotive industry. We continue to see growing demand in power and electronics, building insulation materials, cleaner solvents for the chip industry, and expanding markets for lightweight and stronger materials. We will pace our share buyback program to make sure we are both returning value to our shareholders and preserving a strong balance sheet that will assure our flexibility and allow us to capitalize on M&A opportunities. During 2024, we will complete a $280 million cost realignment in European restructuring program we announced over the past two years. This will help offset inflation, flatten our organization, and allow us to compete more aggressively and respond quicker to market conditions. As mentioned in our prepared remarks, we will be very conservative on our capital spend this next year. We will spend what is needed to assure our reliability and safety, as well as investing in high priority growth projects. Depending on the speed of an expected recovery in 2024, we will be ready to proceed with other projects as market conditions may warrant. In short, as we conclude what has been a year with more challenges than opportunities, we believe that we're in a unique position to rebound quickly as markets shift direction. We will also be calibrating our operations around a conservative approach to spending and capital allocation, with an eye towards long-term shareholder return and reliability. Thank you very much, and with that, we will open the line up for questions. Operator? Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit yourself to one question and one follow-up. One moment, please, while we poll for your questions. Our first questions come from the line of Aleksey Yefremov with KeyBanc Capital Markets. Please proceed with your questions. Thanks, and good morning. Peter, it seems like China, you know, could be one of the main reasons things globally are so, you know, tough in MDI in particular. Do you see anything in China that suggests paths for better 2024? Well, I think that Aleksey, first of all, it's good to hear from you, and I as I look at China, look, we've been saying now for the past year that we're seeing a slow and steady recovery taking place in China. I think we're a little bit of an outlier. Earlier in the year when we were saying that, people were expecting that there was gonna be a very sudden bounce back. But we're seeing in the housing market that interest rates are dropping, and typically, that will mean that there'll be a recovery following, but we're not overly reliant on that. I think where we are invested on the domestic energy conservation in China, around insulation, around building materials, around the EV market, we continue to get market share in, in the, the, auto, both in ICE and in EV, and, in consumer goods and appliances. So our focus is not on the export segment of the Chinese economy, but rather the domestic consumption, and building side of, of the Chinese economy. And in that, I think that we're going to just continue to see slow but steady growth and recovery, in that area. I mean, to that end, as I look at Chinese prices from the beginning of the year, they're actually slightly up from where they started the year, and I think that we're going to continue to see continued improvement throughout 2024 in China. Thanks, Peter, and as a follow-up, it seems like raw materials spiked sometime in Q3, affecting margins in Q4. Do you see this as sort of temporary issue for Q4, such that margins should improve in subsequent quarters? Or is it sort of a reset that could last longer? I don't think that it's going to be a permanent recess- reset, but it is something when we look at raw material volatility. Remember, for most chemical companies, I don't think we're any different. By the time you buy the product today, and, I guess, I suppose some of this still is how you end up doing your accounting, but if you buy the material today, you're shipping it from various places around the world, you're bringing it in, your inventory, you're working it, it works through your inventory, it goes to your customer, you're billing your customer, and, you're getting your money for that inventory, that value of the inventory. It can be anywhere from two months to four months. If you get into slower demand periods and rising raw material costs, that's kind of the worst of all worlds, in my opinion. And I think that's the reason why we were saying a quarter ago, is we were seeing the global uncertainty and the rising cost as we go into the fourth quarter, which is usually a time when people are de-inventoring anyways. I think that we were kind of expecting to see higher costs, slower demand, and that would typically mean a drag on earnings. I think that's what we tried to reflect in the forecast that we've given. Yeah, Aleksey, I think it's clear we've got a headwind going into the fourth quarter, particularly when you look at benzene, which averaged about $3.10 in quarter three. It settled in October over $4. It settled for November at $3.65. Spot price is lower, but that is our largest raw material. Natural gas in Europe has also risen from approximately $10 a BTU to about 14-15 today. So some headwinds there. There are some benefits in the chlorine chain, with chlorine coming down, epichlorohydrin, bisphenol A, but those are outweighed by benzene and natural gas. Thank you. Our next question has come from the line of Michael Sison with Wells Fargo. Please proceed with your questions. Hey, guys. Peter, when you think about, I guess, polyurethanes in total, you've done, you know, a lot of things over the last several years, going downstream and trying to improve the, you know, the quality of the business. This year's, for a lot of businesses, look really tough to see those changes. But when you think about, again, just thinking where the business should be when things recover, you know, maybe talk about where the EBITDA margins can get back to, once all this destocking and difficult times end. Yeah, I think that as we look at MDI fundamentally, I do think that we're in an unprecedented downdraft right now with MDI, putting it mildly. The reason I say that is, this is a product since I've been in it for the last 25 years, and some of the veterans that have been in it for the last 30+ years. We've not seen two consecutive years of falling demand, and that's largely brought about because of macroeconomic conditions. We're not seeing competing materials. We're not seeing a loss of, you know, people that are stop building homes with OSB, they've stopped using MDI in furniture and bedding and so forth. If anything, we see MDI continuing to expand its application base, its chemistry base, and getting better. So I mean, if I, if I look at the bare fundamentals, there's absolutely no reason why this material during normal economic conditions or even normal economic minus a bit shouldn't be doing immensely better than it's doing today. And so I think that getting back to what I would see is mid-teens plus mid-teen sort of margins. I personally don't think that it's going to take a great deal of change just from the sense that I don't see any fundamentals in the business that have changed the broader outlook of MDI. When U.S. housing comes back, that's obviously a very large component of MDI demand. When people buy a new home, not only does the product goes in to build the home, but also to furnish the home in what means of furniture, and bedding, and paints, and coatings, electronics, and so forth. You look at the automotive industry, and particularly this last quarter, while we weren't directly hit with strikes that we saw in North America, our customers weren't hit by that. That did put more MDI on the market than you otherwise would have seen, probably having a detrimental effect. As we look at the global energy conservation and insulation areas around spray foam and insulation materials. Again, I look at those big macro issues. I see no reason why MDI shouldn't recover, and when it recovers, I would gladly predict it. When it recovers, I think it's gonna surprise people how quickly it does. As a quick follow-up, you referenced a Chinese MDI price in the prepared remarks. Where are we in the U.S. and Europe, and how much lower do you think we'll go into the fourth quarter on those prices? And do you think, you know, what's your thought about 2024, and what needs to happen to shore up, you know, all the regions? Well, fundamentally, in 2024, people need to stop tolerating losing money. And I think that fundamentally has to be, you know, a broader issue. You know, it's the age-old issue of any product that's being bought and sold at very low margins, is that, what's the discipline of an industry to be able to sell a product and set a price to return money to shareholders? And right now, MDI is not doing that. And so fundamentally, I think that there needs to be a change in the entire MDI market. Now, that doesn't just come about without economic recovery. It doesn't come about through without customer demand returning, and those things will happen. But as I look at how close much of this is getting to fixed costs sort of returned, it seems like we're there. As I look at pricing in Europe, we've been able to get some modest increases in the fourth quarter. I'd like to say that's because demand is improving, but I think it's more just discipline. And, you know, there are signs that I'm seeing, or at least feeling, that we're to the bottom. But, you know, unfortunately, I think I've probably have said that in the past, and so I'm not ready to call the bottom now, but I think that we're very close to it. Thank you. Our next question comes from the line of David Begleiter with Deutsche Bank. Please proceed with your questions. Thank you. Peter, do you expect this destocking, de-inventoring to continue into Q1? And, and I know it's early, but should Q1 be better than Q4, maybe closer to Q3, or how do you think about Q1 right now? I think that that Q1 is going to end much stronger than how it begins. But I don't think that there's this... First quarter for us over the last couple of years, as we become larger in China and so forth, you know, as we look at the Chinese New Year and the impact that has in the early part of the year, I can't, I simply can't ignore that. There's some of our businesses that do extremely well in a lot of our downstream, the aerospace business and so forth. Typically, their orders will come a little bit stronger in Q1 than throughout the years, and others of our businesses, they do better near the latter part of the year. But I really struggle, Dave, to see that inventories can continue to destock, you know, much into 2024. Typically, people are looking for a year-end pop in free cash flow. They want to end the year having, you know, covered up their inventory, they've gotten rid of as much of it as possible. And typically, Q1, just by and large, is typically not a quarter where people are getting rid of inventories, unless there's an economic, a larger macroeconomic reason to do so. Very good. And I know you mentioned aerospace earlier. Where, how much should aerospace be up this year, and how, what would that take us versus pre-pandemic levels of profitability? I think it's safe to say that we're probably about 55-60% recovered in that business. There's a very healthy backlog on the large jet builders. I would say, you know, it's Airbus and Boeing. There's a very healthy backlog on demand for both of those platforms. Right now, my understanding, having had the opportunity to visit both of those accounts in the last couple of weeks, is really around supply chain issues. You can only build a plane as fast as the slowest component that goes into that plane. I mean, when you think about it, we're talking to them, you know, we're ready to go. We can supply more materials and everything, and, you know, it's a part that most people would never have even heard of on a single plane or a delay that's coming from a part of the world, you know, where metals and so forth might be held up. And so it's the demand is there. I know the aerospace customer base is looking to debottleneck and to increase that capacity as quickly as possible. I'm very confident that over the course of the next 12-18 months that we'll be back to pre-pandemic levels or very close to pre-pandemic levels. And I would say that as we look at the aerospace industry, you know, remind you that about a third of our business therein, 30% of that business is going to be military and commercial. Excuse me, military and private aviation. And we continue to see new lighter, more fuel efficient models come out on the private aviation side. And of course, the more target drones that are built and blown up, that's obviously something we'd like to see as well, so long as nobody's getting hurt. And David, we did see 13% revenue increase year-on-year, so we are seeing some progress in aerospace, despite the supply chain issues that Peter outlined. Thank you. Our next question comes from the line of Kevin McCarthy with Vertical Research Partners. Please proceed with your questions. Yes, good morning. Peter, Maleic Anhydride prices, you know, seem like they're continuing to slide here in the fourth quarter as they have really all year long. So I'd appreciate your updated views there. What do you think we'll need to see to stabilize that market? And maybe you can comment on things like operating rates and butane costs in terms of profiling that business over the next couple of quarters here. Well, we're much larger in that in the U.S. than we are anywhere else in the world. We do have a facility in Europe, and... But I think that I'm not overly concerned about margins right now because butane prices have continued to be very competitive. And so as the prices have come down, raw material prices have come down as well. The larger issue around Maleic Anhydride, in my opinion, is gonna be the amount of Maleic that goes into the construction markets, unsaturated polyester resin and so forth, and what is demand happening there, with imports coming in from areas of the world that continue to get Russian-fed raw materials and so forth. We're seeing trade movements in that customer base that we haven't seen heretofore. You know, look, when you get to a more normalized construction market, I think that will be the opportunity more so than raw material costing and so forth, or manufacturing balance. It's gonna be around demand, getting back to where I would say it's a more normalized sort of an environment. I remind you, Kevin, that we have quite a majority of our contracts in North America, which are on formula-based pricing. So margins themselves, as Peter says, have been relatively stable. Unit margins in North America. Europe's a different story, where it's been under pressure, and it's pressure, you'll be noting the pricing pressure there. That's helpful. Then switching gears, it sounds like you're contemplating a new MIRALON plant. I think your prepared remarks that were released last night said, you know, you're evaluating a 5,000-ton plant. Can you just, you know, talk a little bit about the opportunity there and, you know, put that in possible investment into context? I'm not sure how much that might cost, for example, to build that out. Well, we're in the process right now. We should be starting up the early part of this next year, a 30-ton facility. And just as a reminder, if you were to go to our skunk works, if you will, our R&D facilities, we developed this technology. We started with a number of machines that were producing literally 1 lb a year of capacity. We then went to 100 lbs per year of capacity. At that point, we started selling to NASA in the very high end, where you're looking at thousands of dollars of cost per kilo. We then went to a 1 ton per year, and that proved to be a success. We're building a 30-ton facility right now, in Texas, and when that is complete, we'll be looking at replicating that facility and actually putting it in one of our facilities, where we'll be able to take the byproduct, hydrogen, in one of our own facilities and take the MIRALON material on the other side, and that will be the first quote, unquote, "commercial unit." I say commercial in that all of the output will be fully utilized. When you're looking at that 30-ton facility, you're looking at in the low $10-$20 million as far as the overall cost on that facility. Again, to date, those facilities have only been built in a controlled environment, and putting it in the middle of one of our, our facilities is going to be a real-world experience. We'll be starting on that project, which will take somewhere between 9-12 months to complete, sometime in the latter part of 2024. Then going to a 5,000-ton facility, we see that starting in early 2025. At 5,000 tons of capacity, if, if that proves to be successful, we will have a product that we think will be very competitive on, on a, on a commercial scale, for applications anywhere from traditional carbon fiber applications, to going into strengthening concrete, to going into EV batteries. We're in the process right now of qualifying and getting into a number of those applications. Very crucial time over the course of the next 18-24 months is, as is in any chemical process, going from a bench to a pilot plant, to a commercial operation, to world scale operation. I see all that being completed. So, Kevin, I'm sorry, that's probably way more information than you were looking for, but it's something that we're pushing as aggressively as possible without cutting any corners on the technological side. Kevin, less than $50 million of capital for all the investments that Peter's just described, and spent over a number of years and contained within all of the total capital expenditure that we've outlined for 2024. Thank you. Our next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question. Thank you, and good morning. Peter, just wanted to square your comments on decelerating the pace of the buyback from, I think you were doing 100 a quarter to now maybe it's gonna be 50 in the fourth quarter. In the prepared remarks, you referenced just sort of obviously what's happening to the EBITDA in the fourth quarter in the operating environment. But I think I heard you on the call talk about, you also wanted to have some spare capacity for M&A. So I just wanted to get your latest thoughts on M&A, and how you think about what might be out there versus your own stock, you know, trading in the low 20s. Well, I think right now, from everything we see, our stock remains a very competitive buy and a very good value, unfortunately. But I think that as we look at the broader M&A markets, we are seeing, I would say, a slight improvement on multiples coming down. And as multiples come down, it's not that that's not the only part that's changing asset valuations. EBITDAs, for most assets we look at, are also coming down. And so as we've kind of seen the end of free money, if you will, and I'm seeing a little more competitive environment today. But more importantly than the M&A market, I think for our board of directors and our discussions around share buyback, is we want to have consistency and we wanna have reliability. The discussions around our board table are never, can we afford it this next quarter or even this next year? But rather, how do we have a reliable program that people can count on for the next couple of years? We've got a balance sheet that can weather the storm, that can give us opportunity, flexibility, but also make sure that we're competitive with the best of our peers in the chemical industry on returning value, returning cash to shareholders. So I think it's really a balance of all of those things. So I don't want you to look at the fourth quarter change as just a knee-jerk reaction to a single quarter. But rather, let's assume that we wanna have that flexibility across the board. You know, I think—I still think, as I look back on what we've bought back this last year, the price of our stock, our dividend, and so forth, we've been one of the best in our industry as far as returning value to shareholders. Yeah, I think if you close out the year, we'll have returned in excess of $500 million to shareholders through a combination of dividends and share repurchase throughout this year. Thanks. That's very clear. As a follow-up, I think I also saw that you anticipate completing your planned cost savings program this year as intended. Are you contemplating anything for next year? Well, I think that we're always looking as to how we can be doing things better and more efficiently and more effectively. I think as we look at our overall portfolio, depending on business conditions, and again, I think that we probably have seen some rather unprecedented conditions. I said we've never seen a year where MDI consumption has fallen two years consecutively. You know, we've got to make sure that we see the realities of the marketplace and that we calibrate the business, the cost structure, and so forth accordingly. So, you know, we'll see $60 million in benefits in 2024 that we didn't see in 2023. That's largely because we'll have an annualized savings of 2024 over 2023 of the cost savings that will be completed by this year. But again, yeah, the day we sit back and look at our portfolio and say it doesn't need to be changed or our cost structure is perfect, probably a time when a new management team needs to come in, 'cause I think that's largely what we get paid to do. I think we see some additional opportunities in our manufacturing cost efficiency, as well as completion of the European transformation. We do need to balance next year in terms of making sure that we're limiting the amount of restructuring cash. Next year needs to be a real focus on free cash flow and free cash flow generation overall. As Peter says, $60 million of year-on-year benefits to come from what we've done this year. Thank you. Our next question comes from the line of Frank Mitsch with Fermium Research. Please proceed with your question. Hey, good morning. You know, as I looked at the guide for the fourth quarter, I understand the macros are not great, but the number was, you know, pretty low in terms of what you're guiding. Peter, as you started the call, you said, "You know, look, things are murky. We haven't even started sort of the end-of-year sort of, you know, changes by the customers, maybe they're destocking or what have you, into year-end." So, can you give us some more color as to how you came up with the $65 million-$90 million guide for the fourth quarter? What's kind of embedded in that? If I could be so bold as to ask a more granular question, what the heck did you guys report in October in terms of profitability? How much of that, how much of that $65-$90 is kind of already in the bank? Well, as we look at the October numbers, we're not gonna get into splicing. It's a good question, but we're not gonna get into splicing our monthly performance. But as we look at the demand, you know, across the board here, I certainly wouldn't say that October was a bad month. What we typically see at the end of the quarter, Frank, is customers will come to us, and these are larger customers, not the mom and pops, but the large OEMs are going to the automotive industry and so forth. And they'll typically come in a normal year, midway through December, and say, "You know, we're done for the year." And usually a week or two before that, they'll start canceling orders and so forth. We'll see the fourth quarter ends rather suddenly, not on December 31st, but usually sometime in the month of December. It's usually not that dramatic, but it's pretty close to that. So you really don't see the results of December and October. Typically, you know, the business doesn't move all that much in a month or two. Fourth quarter, it does. What we've heard from customers, we've not seen it yet in the order patterns. What we've heard is that there's going to be an earlier slip shutdown this year. That we're gonna. You know, you hear from customers just anecdotally that they're gonna be shutting down earlier this year. They're gonna be taking the last two or three weeks off, that they're gonna be reducing inventory. Now, you hear that anecdotally, and it just... I don't know, that's why I started about three or four months ago. It's really tough for us, a company this size, to just put on the brakes and say, "We're going to reduce inventory starting this next week," because everything's on the road, everything's on the water, everything's in the rail car. So we anticipate fourth quarter that there's going to be inventory reduction. And if that starts at the beginning of December versus the middle of December, frankly, that's gonna have quite a bearing on our bottom line. So I wanted to just spell out in my comments, even though we're into the fourth quarter, and even though we're starting to see the order patterns as they develop through the quarter, it still is a bit too early to say definitively where we're going to be. Yeah, I mean, Frank, if you're looking to bridge between the $136 million we just did and the midpoint of that range, you can think about half of it being price cost. We've talked about what's going on in the benzene market and the natural gas market. Overall, we did indicate that our China joint venture, PO/MTBE, that EBITDA is gonna come down between Q3 to Q4 by about $10 million, and then the balance of it will be the seasonality and the de-inventorying at the customer end that Peter's talked about. That's very helpful. But, you know, there's a school of thought out there, and I'm curious as to where you fall in this, is that we have been hearing incessantly about destocking since the third quarter of 2022. And so there's a school of thought out there that the destock is, you know, has got to be near an end, and therefore, the sort of seasonality in the fourth quarter in terms of companies rightsizing their inventories, et cetera, may not be as dramatic this year. It seems to me that you're not buying into that thesis, that you still believe there's more destocking that needs to occur. Is that correct? I personally, and Frank, I don't want the headlines to start saying Peter Huntsman is the ultimate pessimist, but you know, I do think that's correct. I do think that there's going to be year-end destocking. And as I talk to customers and so forth, I don't think it's going to be, you know, cataclysmic, but I do think it's going to happen. I would also just note that I've been somewhat befuddled by this, by what you said earlier about, you know, how do you get destocking that takes place for six quarters in a row? I mean, is there that much inventory in the system? And no, there isn't that much inventory in the system, I don't believe. I think that it's really a combination of falling demand and of inventory. I think some of the quarters when we perhaps saw falling demand and how quickly that demand was falling in housing and some of these other areas, I think we took that as inventory destocking, because demand was down and the statistics looked like it ought to be okay. But as you look back on it, I think what we've seen over the last year and a half is really a combination of massive destocking of inventory and a real falloff when you look at areas like housing, building materials, and so forth. Let's remember, going into 2022 and going into even the beginning of this year in a lot of areas, we saw very large inventory builds because of the supply chain constraints that we saw at the beginning of 2022. There were a lot of customers that were sitting on not just our inventory, but a lot of customers' inventories, and they were sitting on their own inventory. I look at some of our OSB customers and OEMs and so forth, they typically will deal with, you know, 20-30 days of inventory. Some of these companies had, you know, 60, 90 days worth of inventory, and we may not see that because they're not holding 90 days of MDI inventory, but they're holding 90 days of some other inventory that they've got to work through before they can start buying ours again. So I think it was just really a combination of issues. But Frank, I do share your view that, whether it's demand or inventory, I think that we're really very, very close to the end of that, the end of that road. Thank you. Our next questions come from the line of Mike Harrison with Seaport Research Partners. Please proceed with your question. ... Hi, good morning, Peter. So the next logical question is maybe on your expectations for destocking as we get into next year. You know, do you think we're in a situation where we see a gradual recovery in order patterns, or could we see a situation where customers are gonna need to rapidly bring production back up, rapidly accelerate orders to meet seasonal demand pickup in the spring? Is that something that we could be seeing about to unfold here? I'm not going to anticipate that, just because it's tough to have the underlying data to justify it. But I do think that if people are getting low on inventory, which I think the market is, I don't think that it takes a whole lot to spook the herd, if you will. Whether it's a single shot of lightning, or in this case, maybe just a rattlesnake somewhere on the ground. And once somebody starts moving very quickly to replenish inventory, you start to see people coming to us, and, you know, "I need some more inventory." And you know what? We're running at 55-60% capacity at this single facility, and it's gonna take us a couple of weeks to recalibrate the plant and to keep, you know, to have the production to be able to fill the inventory. All of a sudden you've got shortages, and all of a sudden people are publishing that there are shortages, prices are going up, and then everybody kind of crowds through the door at the same time. That's usually... And it's usually over something that is minuscule, as a single operator somewhere around the world having a plant problem, a raw material going up. Not that there's anything going unusually wrong in the Middle East right now, but, you know, what would happen if something were to a tanker gets hit or whatever? All of a sudden people see crude prices going up for whatever reason, that means my raw material price is next month are gonna go up, and all of a sudden I'm going back and I can't get the product that I thought I could get. I do think that a number of chemical companies are also operating their facilities, calibrating their facilities around today's demand, not the demand of a recovery, but around today's demand. So I think you take all of those things together, and I think that it does put us in a position where you could see a more sudden knee-jerk recovery than a kind of a longer sustained recovery. All right, that's very helpful. Then my other question's on the spray foam opportunity in international markets. Maybe give us an update on the kind of progress that you're making with spray foam insulation in Europe and in China? Well, I think just in a nutshell, we're continuing to see strong growth in both of those areas. Mostly when we talk about international, we're looking at the Middle East, and we're looking at the U.K.. Those are the two markets where we've got ready-made system houses that are making the raw materials. We've got the sales and marketing forces that are out and aggressive in these markets. I would say that Japan also would be, for us, a growing market in that area. But we're starting from a very low base, but we have very high expectations on that. So I wouldn't see material movement on our P&L because of the sales in those regions, but those are going to be growth markets over the coming years. We're going to see, I think, a real opportunity to change the business. Thank you. Our next questions come from the line of Hassan Ahmed with Alembic Global. Please proceed with your questions. Morning, Peter. You know, on the polyurethane side of things, obviously, a bunch of questions around trying to sort of forecast demand, which obviously in our industry is always, you know, challenging to do. But, you know, it seems that the supply side of things is easier to forecast, right? So as you sort of sit there and look at polyurethane sort of cost curves, I mean, you know, in the response to one of your earlier questions, you talked about how margins are thin, you know, for some of the marginal producers. You know, you guys yourselves reported 8% EBITDA margins this quarter. So I'm just trying to understand, you know, the marginal guys presumably are losing money right now. So with the supply looking the way it's looking, I mean, do you forecast potentially shutdowns, more delays in capacity additions and the like, and how will that play out, as it pertains to a potential recovery going forward? I'm not sure that the recovery going forward is gonna be dependent on any shutdowns. I am a bit surprised that that hasn't happened yet. As I look at the various regions, I look at the U.S., I don't see a lot of shutdowns of total facilities in the U.S. because the major producers in the U.S. only have one facility. And I don't see somebody exiting the North American market, and I think the same can be said for China. Now, there are people there, like Wanhua, that have multiple facilities in China, but I personally just don't see them shutting one of those down. They're very competitive. They start with coal, and they work their way through on a competitive set of economics. Europe, in my opinion, longer term, when I look at the size of the facilities that are in Europe and the number of people that have multiple facilities in Europe, I do question, you know, the longer term viability of some of those assets. But again, I'm not privy to decisions that are made obviously, in those companies. I don't know what their economics are. To the degree that they've got longer term contracts with government assisted money or with unions and so forth, I have no idea, you know, what limitations there might be on that. But fundamentally, I think that the industry is shutting down lines more than they're shutting down facilities. And I think you're probably going to continue to see that. The only supply coming to the market as some will really be one more over the next sort of four-five years. But there's nothing else major that's been announced, and if the industry returns to its sort of 4.5%-5% growth level, then that will outstrip supply as a rebound occurs. Makes sense. And as a follow-up, I mean, if we could sort of switch gears to the M&A side of things, obviously, you know, the balance sheet continues to look very good, and you guys have talked about, you know, inorganic opportunities and the like. I mean, look, in your prepared remarks, you know, a fair bit of, sort of time was spent talking about, you know, the housing construction end market, the auto end market and the like. And, you know, as you guys look at the portfolio today, obviously those end markets are sizable end markets for you guys, right? So rather than sort of, you know, in the past, you've talked about potential M&A opportunities and advanced materials and the like. I mean, as you think about these inorganic opportunities, are you also thinking about potentially diversifying away from housing, autos, and construction, which are sizable end markets for you right now? And, you know, in this market at least, tend to be a little shaky, maybe potentially diversifying away from those end markets. Well, I think that if you, you know, pardon the cliché, but follow the money. Look where we've been investing our capital that we have internally is around producing, you know, cleaning materials for the chip industry, catalysts for polyurethanes and home insulation and so forth. You know, looking at how we diversify further downstream into MIRALON and so forth. When you look at our M&A over the last couple of years, you know, it sits around advanced materials and how we not only get more, but a more diverse field, a broader field of chemistry. I think we've been publicly. If we haven't said it publicly, I'll say it now, you know, as we prioritize where we see the world going. It's going into a greener, it's going into lightweighting, it's going into adhesion, it's going into where our materials, particularly in advanced materials, but also PP and performance products and polyurethanes, but we're seeing particularly in advanced materials, where that is going to be replacing ceramics. It's going to be replacing traditional applications, composite materials, and so forth. And those are going to be the areas of focus for us. So as soon as Phil can bring me a 35% margin business that we can buy for 5x EBITDA, we'll be moving very aggressively. Thank you. Our next question has come from the line of Salvator Tiano with the Bank of America. Please proceed with your questions. Yes, thank you very much. So as we're talking about, you know, hopefully getting a volume recovery at some point, I think your variable decremental margins this quarter were again, around 40% or somewhere in that range. Can you discuss how the decremental margins differ from within each segment and how essentially we would expect a volume recovery in each of the three businesses to flow down to EBITDA? Yeah, I think we were more like year-on-year, about 30%-35% overall on decrementals. So it's good to talk to you, by the way. And then in terms of volume recovery, both polyurethanes and PP have a real, real leverage here to a volume recovery, as construction comes back overall, and obviously that will amend those decremental margins. So advanced materials, really linked into the, to the commentary we made around aerospace and assuming that automotive continues on a decent, global production build path. Perfect. Just as a follow-up on the raw materials for MDI, besides the well-known increase in benzene prices, can you provide us a little bit with what you are assuming for Q4, in each of the key regions, Europe, China, and the US, for other key raw materials, chlorine, et cetera? Yeah, I think we said, so we outlined benzene, outlined where natural gas was headed in Europe from 10 to 15. Chlorine caustic under a little bit of downward pressure overall, so we built that in. Bisphenol A and Epichlorohydrin, which are the two main raw materials, although they still represent a minority of advanced materials purchases, coming off as well. And then you've got ammonia, which is obviously a big raw material into performance products, which has been moving upwards. It moved down throughout the year, but it's been moving upwards. That also impacts polyurethanes and nitric into nitric acid. So that's the way to think about our raw material base. Benzene still remains the biggest raw material that we purchase globally. ... certainly the most volatile. A lot of those products that Phil just mentioned are on longer-term contracts or pass-through contracts with natural gas and so forth. Thank you. Our next questions come from the line of Matthew Blair with Tudor, Pickering, Holt & Company. Please proceed with your questions. Hey, good morning, Peter. So it's obviously a tough market, but your prepared comments did mention that Building Solutions volumes were up both quarter-over-quarter as well as year-over-year. So I don't know, that seems encouraging in the tough construction market. Should that be the read-through for investors? And do you have any more color here? And also, is this because you're gaining share in the spray foam market, or are there other dynamics at play? Well, a couple things. First of all, last year, third quarter, was a pretty tough year. I mean, it was a low point, I think, as we look at the overall business. But as we look at the third quarter, we're up 2%, from versus the prior quarter, we're up 10% versus a year ago. You know, and as we look at some of our other products, like the composite wood products and so forth, as we look at the order patterns thus far in the fourth quarter, and I don't wanna get out ahead of myself, but we're seeing a positive year-on-year comparison there. And that's the first time we've seen a positive comparison there for probably over a year on a quarterly basis. So again, I'm not... I don't wanna get overly encouraged by this, but these are signs you first have to hit the bottom, and then you're going to see a bounce back. So as I look at things from where we are in the third quarter, you know, I think there's some positive signs I'm seeing in HBS, in the Building Solutions, all around in areas around our total insulation business from the prior quarter was up 3% from a year ago. And again, this isn't just spray foam, this is our insulation that goes into rigid panels, construction panels, and so forth. We're down 4% from where we were a year ago, but up 3% sequentially. So starting to see, I think, signs that we're hitting the bottom in some of these areas, and I'd like to think that we're recovering in others of them. So, I would take those as we call them green shoots, but, I think, it's a tired metaphor because we've used it now two quarters in a row, and we haven't seen much more than green shoots. But no, I think there's probably more of those we see today than we did certainly a quarter ago. Okay, that's helpful. And then you mentioned some challenges from rising European natural gas prices. Do you have any hedges in place, or is there anything you're doing today to mitigate potential price spikes in the winter? We do a little bit. I wouldn't say that they're material. It'll protect us from the absolute highs and lows and so forth. But look, I think that those spikes like that are going to impact us as a company on the short term, but I think longer term, what the reverberations of the very poor energy policy that you see in Europe is the longer term, what that does for consumers, what it does for confidence in the macroeconomy, what it does for our customer base that is this more energy-intensive customer base. And so the gas spikes, yes, I think that we've got some protection in there, but not a great deal. My bigger concern, though, is what happens to the macroeconomy there. Thank you. Our next questions come from the line of Josh Spector with UBS. Please proceed with your questions. Yeah. Hey, guys. Thanks for taking my question. I want to zero in on advanced materials. I guess, you know, if you look at your volumes there, you're down something like 40% versus 2019. Obviously, you've talked about Aero, and that has an impact about how that recovers. But when you look at the rest, how much of that GAAP is maybe some lost volumes because it's no longer competitive to play there, destocking, and where would you see the market is? And, you know, my follow-up with that is, your EBITDA is actually not terribly far off 2019, so your unit margins are doing much better. Is that a silver lining about where profitability would be when volumes improve, or is that not the right way to look at it? Thanks. No, I think as you look at that business, two things to keep in mind: One, we've been getting out of the BLR business, so in a lot of the downstream differentiated and specialty ends of advanced materials, we've actually seen very good growth in those areas. I mentioned earlier about some of the components that are going into the EV sports cars and so forth. On the other hand, we've been getting out of the bulk liquid resins, and that is a business, if you go back five, 10 years ago, that's what made up the vast majority of advanced materials. So we've been getting out of large volume, low margin accounts. We've been getting... So when you look at the business overall, it doesn't look like there's—if anything, as you said earlier, you've seen negative growth. But the quality of what we're building, the quality of the core of the business, it continues to grow very aggressively in that division, continues to be very firm and to be very strong. I would also note that since 2019, we've had two large acquisitions in that business that have, I think, both been very successful in integrating those acquisitions from a cost point of view. But now that we're done with the cost synergies, more importantly now is the longer term market opportunity, and what are the customers and applications that this allows us to compete in? And that's, I think that's, as we look at advanced materials on the longer term, boy, if we find good value M&A opportunities there, that certainly is gonna continue to be a high priority for us. Thank you. Our next questions come from the line of Laurence Alexander with Jefferies. Please proceed with your questions. Good morning. Could you give a little bit more color on what you think is going on behind the stutter in the EV market? To what degree your customers are rethinking their structural or their fundamental assumptions? And then secondly, can you just talk a little bit about how you think about working capital days, you know, both next year and kind of where, as you know, and also where you think kind of mid-cycle should be, as your portfolio has been evolving? One very good question. I'm gonna let, I'm gonna let Phil comment on, on the working capital, inventory issues. On, on the EV side, I'm not gonna say that I'm concerned, but if, if I look at that entire chain and you see some of these car manufacturers, I think with the exception of, of Tesla, that was built largely on the back of, of billions of dollars of federal green credits that other companies bought from them. I mean, it's only been relatively recently that Tesla was making money on their, their EV cars in the last couple of years. They've obviously built an, an excellent vehicle. But as you look at the overall EV market, I'm not sure that on a standalone basis, and when you look at some of the more recent earnings on some of these EVs, some of these companies are losing tens of thousands of dollars per vehicle. And they say, "Well, then it's a question of volume," but the volume doesn't seem to be coming. And then you look at the supply chains. Where's the money being made in the supply chains? Seemingly, the components going into the batteries themselves. And that seems to be where the money's being made and who controls the EV components. Well, the Chinese, I think, have done an excellent job in the last 15 years of developing that supply chain, the refining, the mining, the processing, the expertise in that area, and give them credit for what they've done. So, Laurence, all of those things I just outlined, that's well above our pay grade, at least mine, as far as where the EV markets are going. But as I look at the applications going into an EV, any EV vehicle is going to need a couple of basic issues. They're going to need lightweight, strong materials. They're gonna need effective and efficient batteries, which are gonna require ultrapure ethylene carbonate. It's gonna require materials like our forthcoming MIRALON and some of the other materials that we're producing today. That's gonna reduce the weight, strengthen the car and give manufacturers better mileage overall and hopefully lower costs in building the car, so, and better comfort. So, as we look at this, on all of our divisions, we continue to have more opportunity per vehicle on an EV than we do in ICE. So I continue to be a proponent from a business point of view for that. I can't answer all the economic conundrums of it. But I won't comment further on that. But I do think that as we look at the opportunities for Huntsman, we continue to see a lot of opportunities, not just today, but over the course of the next two or three years. Laurence, on working capital, we target approximately 30 days cash conversion cycle. At the year-end, you want to think about that, but for 2024, we have been bringing down our inventories in quarter three, about 5% in the third quarter. Looking at another 10% in the fourth quarter to make sure we're calibrating to overall demand. I do think there's an opportunity as we move through 2024 to further improve working capital, and we highlighted that in the prepared remarks. Thank you. Our next questions come from the line of Patrick Cunningham with Citi. Please proceed with your question. Hi, good morning. So you decided to pause the UPEC project given the weaker pricing there, but on the flip side, you're moving forward with the other two projects. So can you talk about what gives you confidence to move forward in those markets there? And what's the expected contribution to both 2024 and run rate earnings from those projects? Yeah. So Patrick, two projects, as you indicate, one in Conroe and one in Pétfürdő in Hungary. The one in Conroe, linked into the semiconductor market, we're confident about that. We're confident about the delivery of that project, despite a lowering of the semiconductor market this year. In the long run, our cleaner amines will play out well in that market, and particularly with all of the investment that's going on the ground in North America. We'll have that up and running in the first half of next year and contributing to the P&L in the second half of 2024. The one in Pétfürdő is firmly linked into insulation, energy efficiency, and also into automotive for low VOC products, which the automotive OEMs demand. So again, we're not concerned about the ability to sell out those projects at decent margins. Wanhua has been the one that's been the issue, and that's just been a flood of Chinese material that's come in. And therefore, we've done the appropriate thing, paused that construction, where we started at the appropriate time. We can get it going within 12 months, but right now, the returns aren't there, and we can divert that capital to other projects such as MIRALON in advanced materials. In terms of benefits, overall, we think of about $10 million, maybe in the second half of next year from the two projects, and that ramps up over time to over $30 million as you move through 2025 and 2026. Operator, we're at the top of the hour. Why don't we take one more question? Thank you. Our next question comes from the line of Arun Viswanathan with RBC. Please proceed with your question. Great. Thanks for taking my question. You know, if we look at over the last couple of years, I think you did a 1,350 or so EBITDA in 2021. You removed the textiles business, and maybe you're down to 1,250 or so as a peak. You're run-rate around $400 million right now. So, you know, is that the right way to think about kind of trough to peak EBITDA of Huntsman as it stands now and maybe like a $800 million mid-cycle number? And if so, any kind of, you know, larger items that would take you from, say, that $400 to that $800 million annualized number? How should we think about that? Thanks. Yeah. Arun, so I mean, your calculation's right. We're $1.2 billion, excluding Textile Effects, at the recent sort of 2021 and 2022 high overall. Look, we have to look for three things, right? Ultimately, for the current rates to come up. One is a continued recovery in China. We've seen a steady and moderate improvement. We do expect improvement next year. US construction markets absolutely have to turn. About 40% of our business is in North America, and a decent portion of that is into US construction, whether that's residential or commercial, so that needs to return upwards. And then ultimately, everyone needs to find a way to make more money effectively in Europe, with higher gas prices. And those three things are the key elements, macro-wise, which will move profitability up. In addition to that, we obviously do have some projects coming online in performance products. We have projects coming online in advanced materials over the next few years, and you can expect an aerospace recovery as well, moving those numbers up. Thanks. Operator, we, I think that we're done with our time. We'd like to thank everybody for taking the time to join us this morning. Thank you. That does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.