Huntsman Corp., the chemical maker fighting to complete its takeover by a unit of Apollo Management LP, on Wednesday reported profit that fell because of higher costs for energy and raw materials.
Excluding some items, profit dropped to $19.9 million, or 9 cents per share. It was the fourth straight quarter that profit trailed analysts' estimates, according to data compiled by Bloomberg.
Chief Executive Officer Peter Huntsman is in a legal battle with Apollo, after Apollo's Hexion Specialty Chemicals unit tried to cancel its proposed $6.54 billion merger with Huntsman Corp. Adjusted earnings fell in three of Huntsman's four business units as price increases lagged behind a 21 percent jump in the cost of goods sold.
"Results were weak across the board," Hassan Ahmed, a New York-based analyst at HSBC Securities, said in a report.
Huntsman fell 16 cents, or 1.2 percent, to close at $13.64 on Wednesday. The shares have declined 47 percent this year. Huntsman is run from Salt Lake City and The Woodlands, Texas.
"We are encouraged by the recent moderation in crude oil and natural gas prices that we have seen in the past several weeks," Peter Huntsman said in a statement. "This, together with the aggressive actions we have recently taken to increase our selling prices, is expected to result in further opportunities to increase margins in many of our products."
The average price of crude oil surged 90 percent in the second quarter from a year earlier. U.S. natural gas climbed 50 percent in the same period.
Hexion sued Huntsman on June 18 to terminate the merger, contending Huntsman's deteriorating finances would render the combined company insolvent. Huntsman in turn sued New York-based Apollo and its principals Leon Black and Joshua Harris on fraud claims.
Huntsman's declining earnings and rising net debt "validates" the solvency opinion Hexion obtained from consultant Duff & Phelps LLC, Hexion said in an e-mailed statement Wednesday.
"These results further demonstrate that Huntsman has suffered a material adverse effect, which is the primary reason why the combined company would be insolvent if the transaction were to be completed based on the agreed capital structure," Hexion said in the statement.
Net debt as of June 30 rose 12 percent to $3.81 billion from a year earlier, Huntsman said Wednesday.
Adjusted earnings before interest, taxes, depreciation and amortization fell 15 percent to $209.8 million, from $246.4 million a year earlier, the company said.
Huntsman reported net income of $23.7 million, or 10 cents a share, in the second quarter, compared with a net loss a year earlier of $70.9 million, or 30 cents. The earlier results were reduced by $240 million of expenses related to the sale of the polymers business.
Profit excluding items in the second quarter of 2007 was $83 million or 36 cents per diluted share.
Peter Huntsman said Wednesday on a conference call that Hexion obtained a solvency opinion, without Huntsman input, that was "based on a series of dubious assumptions" to end the merger. Hexion's claim that Huntsman has suffered a material adverse effect is wrong and contradicted by second-quarter results, he said.
The trial of Hexion's lawsuit in Delaware Chancery Court, set to begin on Sept. 8, will last about one week and should allow Huntsman to close the transaction "soon after," Peter Huntsman said. He didn't take questions from investors and analysts on the call.