Profits short of estimates for Huntsman

Salt Lake-based Huntsman Corp., the fourth-largest U.S. chemical maker, reported second-quarter net income of $112.7 million as prices for some chemicals rose. Profits fell short of analysts' estimates, and the stock tumbled a record 6.9 percent.

Per-share profit was 48 cents, Huntsman said Thursday in a statement. A year earlier, the net loss was $185.4 million, or 94 cents a share, after payment of preferred dividends. Revenues rose 21 percent to $3.34 billion.

Polyurethane profits jumped 67 percent as Chief Executive Officer Peter Huntsman raised prices for MDI, or diphenylmethane diisocyanate, used to make foam for insulation and furniture. Profits were below estimates for titanium dioxide, a white pigment, and base chemicals, analysts said.

"They have done very well passing through price increases under the cover of higher energy costs," Jeffries & Co. analyst Laurence Alexander said from New York. "The issue this quarter was the soft commodity business," particularly pigments, he said. Jeffries rates the shares "hold."

Excluding costs for early debt repayment, restructuring and plant closings, per-share profit was 73 cents. On that basis, the average estimate of 10 analysts surveyed by Thomson Financial was 82 cents.

Huntsman shares fell $1.63 to close at $21.87 Thursday on the New York Stock Exchange. The percentage decline was the biggest since the Feb. 10 initial public offering. The shares have dropped 4.9 percent since their debut.

In commodity chemicals, "conditions appear to have stabilized and are hopefully poised to recover in the second half of the year," Peter Huntsman said on a conference call with analysts and investors.

Base-chemicals profits fell 0.5 percent to $83 million, Huntsman said. Gains from prices that climbed 24 percent were eroded by higher energy costs and plant maintenance, the company said. The chemical unit was expected to have $125 million in profits, and the missed forecast was responsible for the quarter's earnings shortfall, Merrill Lynch analyst Donald Carson said in a note.

"The remaining segments all performed closely in line with expectations," Carson said. He rates the shares "buy." Merrill Lynch does investment banking with Huntsman.

Chemical profits fell from a record first quarter as average U.S. contract prices for ethylene tumbled 7.7 percent to 38.3 cents a pound, Huntsman said. Higher raw material costs will further erode chemical margins in the third quarter, even as demand stabilizes and producers try to raise prices, he said.