Huntsman Considers Divesting or Adding to Pigment Unit

Huntsman Corp. (HUN), the fourth-biggest producer of titanium-dioxide pigment, said it’s considering either selling the unit that makes the white paint ingredient or adding assets to the business.

“We want to be part of any consolidations in this industry,” the Salt Lake City-based company’s Chief Executive Officer Peter Huntsman said today on a conference call to discuss first-quarter earnings.

Huntsman joins competitors Rockwood Holdings Inc. (ROC) and Tronox Ltd. (TROX) in reviewing operations that make the pigment known by its chemical formula, TiO2, which is used to add opacity to paints and plastics. Rockwood CEO Seifi Ghasemi repeated today that he plans to sell the pigment unit by year end. Tronox said in February it was considering acquiring TiO2 assets to use its excess capacity for making titanium ore.

“There are opportunities to sell, buy and to merge,” Kimo Esplin, Huntsman chief financial officer, said in a telephone interview today. “What we are interested in is a fast route to create value.”

Huntsman rose 1.5 percent to $18.95 as of 12:27 p.m. in New York. The shares have gained 19 percent this year.

Pigment earnings, which have eroded in each of the past four quarters, should stabilize in the second quarter as price declines end and excess inventories are consumed, Peter Huntsman said on the call. Rockwood and Huntsman both said they expect TiO2 profit will improve in the second half compared with the first half.

Pigment Sales

Pigment sales volumes in the first quarter rose 27 percent from the fourth quarter, while average prices declined 11 percent, Peter Huntsman said. Rockwood said TiO2 volumes rose 40 percent from the prior quarter, while prices dropped 8 percent. Both companies said they plan to keep plants running at low levels to further reduce inventories.

Higher TiO2 prices will take hold first in non-paint markets such as inks, pharmaceuticals, food and suntan lotion, with gains in paint markets occurring later in the year, Peter Huntsman said in the phone interview.

By 2014, earnings before interest, depreciation and amortization should reach a “normalized” level of about $200 million, he said. That compares with pigment Ebitda of $9 million in the first quarter.

Cash from the sale of any business would be used to pay down debt and possibly to grow the company, he said.

Methanol Plants

“We want to maintain a strong balance sheet and at the same time we are anxious to see what opportunities are out there,” Peter Huntsman said on the conference call.

Huntsman may invest in one of the methanol plants proposed along the U.S. Gulf Coast to take advantage of inexpensive natural gas, he said in the interview. Huntsman is among the world’s largest methanol buyers, which it uses to make the gasoline additive MTBE, and it currently has no production capacity, he said.

Huntsman may take an equity stake in a methanol plant or agree to buy a base amount of production at an advantaged price, he said. Celanese Corp. (CE) and LyondellBasell Industries NV (LYB) are among companies planning to add U.S. methanol capacity.

DuPont Co., is the world’s largest producer of TiO2, followed by Cristal Global, Kronos Worldwide Inc. (KRO) and Huntsman, fifth-ranked Tronox said in a July presentation.

To contact the reporter on this story: Jack Kaskey in Houston at jkaskey@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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