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Huntsman Gains on Business Repositioning

Zacks Equity Research

Chemical company Huntsman Corporation ( HUN) announced last week its plans to reposition its European surfactants business in an effort to make it more closely aligned to its targeted markets. Its shares gained 2.6% following the announcement.


Huntsman’s shares clocked a new 52-week high of $21.99 last Friday, eventually closing at $21.92. The stock is up around 41% so far this year compared to a roughly 20.5% gain for the S&P 500.


The surfactants business is a part of Huntsman’s Performance Products division. The move underscores the company’s strategy to move away from a number of commoditized surfactant assets and product lines and focus on developing and advancing the remaining differentiated surfactants business in strategic markets.   


The restructuring, which is expected to consummate by the end of next year, is likely to affect roughly 250 jobs in Huntsman’s Performance Products European unit over the next 18 months. The company envisions annual EBITDA benefit of around $20 million from the move. The repositioning, however, will not affect Huntsman's surfactants business in other parts of the world as well as other product lines in the Performance Products segment.


Huntsman, which has annual sales of more than $11 billion, makes differentiated chemicals. Its makes products for an array of industries including chemicals, plastics, automotive, aviation, textiles, paints and coatings, construction, technology, agriculture, health care, appliances and packaging.


Huntsman saw its second-quarter 2013 profit (reported on Jul 31) slide 62% year over year to $47 million or 19 cents a share as it had to contend with pricing pressure in its titanium dioxide (TiO2) pigment business. The bottom line was also hit by higher restructuring, impairment and plant closing costs.


Revenues fell roughly 3% year over year to $2,830 million in the reported quarter. Higher sales in the textile effects business was more than masked by declines across polyurethanes, advanced materials and pigments franchises.


Revenues from the Performance Products segment were essentially flat year over year at $777 million as lower average selling prices was offset by better sales mix. 


Huntsman currently carries a short-term (1 to 3 months) Zacks Rank #3 (Hold).


Other companies in the chemical industry worth considering are Air Products & Chemicals Inc. ( APD), FMC Corp. ( FMC) and Praxair Inc. ( PX) with all retaining a Zacks Rank #2 (Buy).

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