Bad Day On Wall Street, Especially For Huntsman

The Dow Jones Industrial Average’s 513 point, 4.3% decline was bad yesterday. Huntsman Corp’s $5.58, 30.5% decline was even worse. (There is no typo in the preceding sentence.) Such declines among large chemical companies are pretty rare. In fact, they mostly happen to target companies of acquisition attempts that go up in smoke. Huntsman has actually had similar declines. One was in June 2008, when Hexion reneged on its acquisition offer, causing Huntsman stock to decline by 40%. And in December that same year, when the two companies settled their lawsuits against each other and Huntsman lost about half its value. Huntsman’s quarterly, adjusted per-share earnings were 48 cents, missing Wall Street analyst estimates by a penny. Huntsman actually earned 31 cents in the year-ago period. But this earnings season, other companies like Dow were blowing through estimates, making Huntsman an outlier. There were few of negatives in the quarter, Huntsman’s earnings were impacted by strong exposure to the Swiss franc. Its advanced materials business—which makes thermoset resins for composites-had difficulty passing along price increases. Its textile effects unit has been impacted by high cotton prices. From a Reuters report, there seemed to be an interesting exchange during the earnings call:
Jeff Zekauskas, a JPMorgan analyst, was bothered because the company reported results only 90 minutes before the conference call, leaving him little time to wade through unusually complex financial tables. "It's very difficult to reconcile all of the income statement numbers to the data that you provide," Zekauskas told Huntsman executives on a conference call. Huntsman said he thinks his company gives the right amount of information. "We're certainly going to be looking internally as to any changes we would make," he said. "I think we give plenty of pages of financial information."
The report does make it seem like there was more of a testy exchange between Zekauskas and Huntsman than there indeed was. Here is what Zekauskas said, according to a Seeking Alpha transcript:
So if I could just, make one comment. When you report your earnings, it's about an hour and a half before your conference call and your financials are quite complex and it's very difficult to reconcile all of the income statement numbers to the data that you provide. And so what you might consider is you might consider a more complete reconciliation so that the adjustments can be made more easily, and so it's easier for people to focus on the fundamentals of what you reported rather than trying to reconcile the numbers, or it's at least something to consider.
This seems more of a critique about how Huntsman is presenting the numbers than an accusation of wrongdoing. (Full disclosure, I tried following the adjustments in the release and quickly gave up.) To Zekauskas’s remark, the Huntsman CFO Kimo Esplin replied “fair enough.” The quote from Peter Huntsman himself apparently comes from a subsequent interview with Reuters. Another interesting moment in the call came from Andy Cash of UBS. He asked Huntsman is he was going to sell the textile effects and advanced materials units. “I believe those businesses are as profitable in our hands as they would be in anybody else’s,” Huntsman said. It is interesting that analysts are wondering such things. Update: Huntsman today announced a $100 million share repurchase program, effective immediately.

Author: Alex Tullo

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