Greetings and welcome to the Huntsman Corporation Third Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ivan Marcuse, Vice President of Investor Relations. Please go ahead, sir.

Great, thank you Kevin and good morning, everyone. Welcome to Huntsman third quarter 2019 earnings call. Joining us on the call today are Peter Huntsman, Chairman, President and CEO; and Sean Douglas, Executive Vice President and CFO. This morning before the market opened, we released our earnings for the third quarter 2019 via press release and posted to our website, huntsman.com. We also posted a set of slides on our website, which we will use on the call this morning while presenting our results. During this call, we may make statements about our projections or expectations for the future. All such statements are forward-looking statements, and while they reflect our current expectations, they involve risks and uncertainties and are not guarantees of future performance. You should review our filings with the SEC for more information regarding the factors that could cause actual results to differ materially from these projections or expectations. We do not plan on publicly updating or revising any forward-looking statements during the quarter. We will also refer to non-GAAP financial measures such as adjusted EBITDA, adjusted net income, and free cash flow. You can find reconciliations to the most directly comparable GAAP financial measures in our earnings release, which has been posted to our website at huntsman.com. I will remind you that on August 7, 2019 Huntsman announced a sale of its Chemical Intermediates and Surfactants Businesses to Indorama Ventures in accordance with Generally Accepted Accounting Principles these assets are now reported held for sale in the balance sheet and as discontinued operations on our income statement. Therefore, the results we have highlighted in our earnings release and we will discuss in the call are for continuing operations of our business. I will now turn the call over to Peter Huntsman, our Chairman, President and CEO.

Ivan, thank you very much. Good morning everyone. Thank you for joining us. Let's turn to slides number 3 and 4. Adjusted EBITDA for our polyurethanes division in the second quarter was $146 million versus $218 million a year ago. As Ivan mentioned, our North American propylene oxide and MTBE businesses are now reported as discontinued operations. Therefore, our continuing operations for our polyurethane divisions are now nearly entirely comprised of MDI based formulated systems, elastomers, and MDI components. As a reminder and as we have called out in the past, in the third quarter of 2018, we were still experiencing exceptionally high margins in the component end of our MDI portfolio. These spiked margins including above normal operating rates, conditions accounted for approximately $45 million of the year-over-year variance. MDI volumes in the quarter were up 3% as the business continued to benefit from the expansion of our Chinese facility that began to come online in the third quarter of 2018. Our downstream strategy continues to perform well. Our margins remain stable in the larger differentiated end of our polyurethanes portfolio. This stability is a result of our continuous drive downstream, ongoing material substitution, product innovations, benefits from bolt-on acquisitions, global scale up opportunities, and increasing regional diversification. In the third quarter, our total differentiated systems volumes were about flat compared to last year, and our global component MDI grew 7% year-over-year due to the new capacity added at our Chinese facility. What we experienced in the third quarter within our polyurethanes division was a continuation of what we were saying at the end of the last quarter in most of our key end markets. However, in Europe, the economic headwinds did intensify somewhat in September. We believe that the destocking we reported impacting the first half of the…

Thank you Peter. As Ivan stated at the beginning of the call with the pending sale of our Chemicals and Intermediates and Surfactant Businesses to Indorama Ventures we now report these businesses as discontinued operations in the income statement and as held for sale on our balance sheet. This is our first quarter in doing so resulting in an expected transition for Wall Street to align their models and estimates with our earnings on a continuing operations basis. Now turning to Slide 8. Third quarter adjusted EBITDA declined year-over-year by $93 million. The decline in EBITDA can be largely explained in two primary parts the first part being volumes. Because of the weak global economic backdrop we saw volume pressure on our downstream businesses but with minimal impact on margin. Volumes were down in our advanced materials business by 11% and our performance products business by 11% and within our textile effects business by 7%. We saw downstream volumes within polyurethanes largely flat. The second primary part for the decline in EBITDA is due to margins which is largely a portion to the upstream component end of our polyurethanes division. Margins within our downstream polyurethanes division remains stable. Margins also remain resilient with our advanced materials segment and largely so within our performance product segment. Margins within our textile effects division were mixed with more stability in the specialty end of this portfolio. Turning to Slide 9, in spite of lower EBITDA we saw strong free cash flow. With the softening global economic backdrop receivables contracted thereby freeing up cash. Additionally we continued to proactively manage our inventory levels. Our free cash flow conversion continues to be consistently strong with an adjusted LTM conversion rate of approximately 40%. We have removed the impact of the Chemicals and Intermediates and Surfactants…

Thank you Sean. We stated in our last earnings call at the end of July there are many different variables out of our control that could either improve or worsen which would impact our second half results. Unfortunately not much has improved on the global stage as many of you see in the macro data such as slowing GDP, weakening PMIs, and a rather sudden falloff in the European economic performance. Meeting with investors and analyst we often get asked how our current portfolio businesses will perform in a recessionary type environment. I believe you are currently getting the answer, between destocking and slow GDP we are arguably in an industrial recession in many of our core regions and markets. However, while we are seeing lower volumes it is important to note that our downstream margins are holding up well, we're generating strong free cash flow as our businesses are taking the appropriate steps to manage working capital as well as pulling back on discretionary spending including more cautionary spending on capital projects. Well we're not expecting the economic environment to change for the better in any material way in the near-term, we will continue to focus on what we can control. Depending on a number of different factors as we look into the fourth quarter we expect adjusted EBITDA for our continuing operations to be about 15% below the third quarter. This gives consideration to the lingering economic challenges and the typical seasonality of our businesses. Now let's turn to Slide 10 and 11. In conclusion I'd like to spell out our priorities in the coming months. Number one, we'll continue to stay focused on operating safe and reliable operations while maximizing the value of what we sell into our global markets. Despite sluggish demand in many areas around…

[Operator Instructions]. Our first question today is coming from Kevin McCarthy from Vertical Research Partners. Your line is now live.

Good morning. Peter as you anticipate the influx of 1.6 billion in cash proceeds from the Indorama deal can you elaborate on how you're thinking about organic growth investments versus M&A for example with regard to your splitter project. Notwithstanding the higher costs, it sounds like you're looking at a return above 20% there, do you to see other projects or opportunities like that that could claim a substantial portion of the capital, and maybe you could just elaborate in general on your latest thoughts there?

Well, thank you very much Kevin. I look at the splitter that we're building in Geismar Louisiana to be something almost akin to an acquisition. We have a very similar splitter in Europe, we have one in Asia. With the completion of this facility in the Americas, we're going to be very well positioned by producing crude MDI, splitting capacity, and downstream. I don't see a lot of large CAPEX projects. So, if you were to give me $150 million right now and say go spend it internally, I I think I'd be rather hard pressed at the present time. I don't see a lot of large scale projects like that and frankly I'm not a big believer in that. It seems that as you build virtually anything in the last decade in the U.S. Gulf Coast, costs just continuously are going up and I've never been a big proponent that this industry needs more capacity of just about any product. I think that we need greater diversity of technology and the ability to perhaps specialize the products we're producing. But frankly, I don't see this company going headlong into spending a lot of CAPEX around building new capacities around the world. So, as I look at that threshold because of the risks of higher costs and uncertainty about making commitments today as to where markets will be two, three, four years down the road when you complete such projects, I think that they warrant a much higher IRR in general than M&A does, where you know what you're getting upon closing, and you have a good outline of synergies, technologies, globalization, and you can have a plan of action on day one. That's rather difficult to do when you're planning a new MDI plant that won't be coming into the market for upwards of four, five, six years. So, I think that we're going to be certainly leaning more towards M&A opportunities, and again I emphasize that on a cautionary note as I did in my script, and I would also say that we want to make sure that whilst -- particularly while we're in what I would consider to be a rather challenging economic conditions, we need to make sure we retain the strong balance sheet. We've got plenty of capital to continue to pay a competitive dividend, and we are very committed to share buyback program when the share price is at appropriate levels.

Thank you for that, it's helpful. I guess on a related note for Sean, I wanted to clarify in my own mind some of the comments that you made about the capital budget, I think you mention 270 million. Is that an indicative pro forma level post the separation of the Indorama assets, and then I think you mentioned 70 million for discontinued operations, what is that and is it in addition to the 270? Thank you.

Yeah thanks, thanks Kevin. Yeah, you're right. Think about going forward that this remaining business will have probably between 250 to 275 of what I'd call ongoing CAPEX and think about mandatory spend in that 250 to 275 of around 150 to 170. The 270 I stated includes $15 million for this new splitter. It does not include any of the spending that's in the discontinued operations. That $70 million for the discontinued ops is in addition to that, and we're now just reporting on remaining basis of continuing ops. So, the 70 is apart and separate from the 270, and it is largely mandatory expenditure.

Thank you.

Thank you, our next question is coming from Laurence Alexander from Jefferies. Your line is now live.

Good morning, could you discuss a little bit for both advanced materials, and in polyurethanes how you are seeing the competitive dynamics shift in response to weak environment. That is are you seeing capacity curtailments, are you seeing changes in pricing behavior, extended outages, any other kind of indications of sort of how the market is reacting in this environment?

I think, Laurence it really is a little bit of a mixed view. The further upstream that you are or the more commoditized the product and the application, I think the more competitive pricing and margin pressure that you're seeing. Further on down the chain where you have a product that has been specked into a customer, where you have a multi-year commitment and where you're selling in effect or performance rather than a commodity raw material that maybe has a little bit of work done to it. You know I think that we're seeing far less of that, and so as I look at something like our advanced materials in aerospace, as I look at our downstream formulation, applications in MDI, polyurethanes and so forth, margins for the majority of the business -- margins are holding up very well. It is volume that is hurting the bottom line, and I suspect that volume will obviously be coming back as the economy starts to stabilize or even if the economy doesn't stabilize when you see a lot of the de-inventorying, destocking that is out there taking place. So, again I would say, and it's always -- I probably will get in trouble for saying something this broad, but I'd say that I'd like to think that two thirds of our business is more volume sensitive, meaning that I think margins are pretty stable by and large and we're going to be more affected by volume, and maybe a third of our business you're seeing more competitive factors that might be impacting to some degree or another margins. And so, it is again product by product, region by region, division by division. Those things will vary, but I think that obviously we would like to get more and more of our products into that two thirds category.

And are you seeing any sort of significant curtailments of customer R&D cycles, innovation cycles, new product development in response to the soft environment or is that inconsistent?

I have not, as a matter of fact I might be seeing and I don't want to say that this is going to continue but for the time being I think that there's -- you take in the economy like Europe where you're seeing virtually no growth in GDP perhaps even a bit of shrinkage right now in economies like Germany. So for product substitution, things around sustainability, things that have an environmental improvement and push I think that there's actually more innovation in certain applications. I look in the footwear industry where a lot of the producers today are looking to have a single grade of material that goes into the soul of the running shoe versus four or five different elastomers and colors and so forth that go into the sole of a running shoe. You look at those sort of -- it might sound rather drab but those are areas where we're seeing where there's increased reward, increased opportunity. And so I think right now I've not seen a decrease in the reward for innovation and the opportunity to replace product substitution. I would imagine 2020, I've not seen the budget yet, we've not completed for 2020 but I would imagine that the majority of our growth in 2020 will be through product substitution.

Thank you.

Thank you. Our next question is coming from Bob Koort from Goldman Sachs. Your line is now live.

Thanks very much. Peter you had commented I think that you're seeing component MDI margins pressured. I guess your major competitor from Midland yesterday showed some charts that is Asia Pacific that seem to suggest maybe things have bottomed out there some, Peter, where do you see the incremental thing coming from in commodity MDI?

Well given the number of competitors that we have in Midland I won't even try to guess who that might be but I think that in earlier conversations I think last quarter we said that we thought that China was most aggressive in bottoming out its inventory. And I think that as we look at now and my earlier comments Bob I think that I said that we felt that China not just in MDI but perhaps in some of our other products but more particularly in MDI. That said the inventories that were very low and I think that we're seeing -- if anything I think we saw a little bit of growth that took place in the third quarter in MDI after you take out the effect of our new capacity there. And I think that's probably the first quarter in the last three quarters or so where we have seen a return to growth in China. So I'm not here to say that China is off to the races and we are going to great guns there but I do think that it has more to do with the idea that we're done with destocking on a large basis in China. I'd also just know Bob that as we look at a lot of the announced capacities that are coming into the MDI market that seemingly a lot of those likewise have been either delayed or has been outright cancelled and so I think that between lowering of the -- kind of the destocking coming to an end here and perhaps some of the capacities either canceled or pushed out I'm probably quite bullish on MDI. So look out over the next 12 to 18 months. Again depending on the macroeconomic environment as well.

I guess maybe combining that with you made comments that multiples are starting to come down but your own multiple I guess in a pro forma basis after the Indorama deal looks like it's maybe 6 times 40 but that seems like a pretty large discount given that enthusiasm you expressed and maybe high grading of the portfolio, so how do you square that with pursuing acquisitions and the risks that come with that versus buying your own arguably discounted equity?

Well I think that we need to continue to balance both of these very well. You know I look at what I see is our multiple -- I think we've seen an expansion over the course since we've announced this deal and I think that the market will reward you a little bit when you announce it. I think it rewards you a bit more when you actually get it done and I think it rewards you quite a bit more when you redeploy the capital smartly. I mean it's got to be done by a combination of both share buybacks as we have seen in the last quarter or two. I think we just last quarter we bought an $80 million worth of shares all under $20 a share and at the same time we also bought in our 50% partnership of our maleic anhydride business and simultaneous this last quarter we sold off $2 billion worth of -- $2.1 billion worth of our business. So I think we've got Bob do all three of those things very smartly and I think that over time the market will reward you and the multiple will continue to improve.

Great, thank you Peter.

Thank you.

Thanks. Our next question today is coming from Jim Sheehan from SunTrust Robinson Humphrey. Your line is now live.

Good morning, thanks for taking my question. Could you talk about your thoughts on monetization of the remaining stake in Venator Materials and how if at all that any loss associated with that sale could be used to shield taxes on your transaction with Indorama?

Okay, I'll let Sean talk about taxes because that's certainly his favorite subject to talk about. I think that as we look at the Venator share values obviously it's taken very low value. I obviously I don't want to comment on what we may or may not be doing on a future basis but we do need to be able to look at the potential monetization there factored in with the tax implications with it and where that capital can be best deployed. So again rather evasive answer but we'll continue to evaluate that very carefully.

Thanks Peter. Jim as we think about this, think about it this way that the sale to Indorama will create on a portion of that sale a capital gain to Huntsman. And as you look at the Venator stock there is a high basis left in that stock near about the IPO price. And so what that will allow us to do is upon the divestiture of Venator down the road it will allow us to the degree that we are under that IPO price. It will allow us to have a capital loss that we can offset against the capital gains. And now there's a three year kind of a time frame that's allowed with IRS to do that which allows you to roll back. And so think about potential value opportunity on the tax side in terms of savings which helps the leakage on the Indorama sale to be up to around $140 million all dependent again on the timing of the end price of the exit of Venator, hope that helps.

Very, very helpful. Thank you very much. And then on the Demilec business you're making progress, synergy capture seems to be on track, can you just talk about where EBITDA margins were in that business when you acquired it and if you've experienced any margin expansion associated with this synergy capture and the double-digit growth in the business?

Yeah, I think that we see at the time of the acquisition about a 16% at the time of the acquisition and moving to about 20%. Now again there is going to be a little bit of noise on that when you look at some of the transfer pricing and values and so forth. But I think more importantly we look at the Demilec purchase which is just over a year ago and it's today around when we purchased that it was about 11.5 times EBITDA and I think that that EBITDA if I would annualize its present run rate is an acquisition of around seven times EBITDA. And we look at that on an integrated basis, fully integrated MDI basis of somewhere in the low 20% and a very stable 20% and growing at that. So again I think that it's something that we look at overall growth in that business as low double-digit growth and we still have just a small, very small fraction of the overall market in the spray foam. So a lot of room to expand. I'd love to see more tonnage frankly from our MDI business moving into spray foam and out of the general market if you will. And I think that's a strategy we need to push.

Thank you.

Thank you. Our next question today is coming from William Blair from Tudor, Pickering, Holt. Your line is now live.

Hey guys, this is Matthew Blair, how is it going?

Okay.

Good, good, in -- Peter you mentioned you had about 10 million of fixed costs rolling through it that would support future growth. And that products would soon be coming to market, could you just provide more details on exactly what kind of products those are and what the EBITDA uplifts might be?

Yeah, I think that the EBITDA that I am looking at I would think that -- I think that that business is operating around 20%, low 20% EBITDA. Business is something that I'd like to just maintain that. I'd like to see more growth in that business rather than margin expansion of that business. I think that in order to have that growth we need to be investing in a product pipeline. When you're looking at new applications going into the aerospace business that's not a process that takes six months, that's a process that can take a year or two. When you look at winning certain defense contracts on composite materials going into drones or armor plated vehicles and so forth those are processes that can take a year or two. And once you're in you're in for multiple years. And so I think that as we look at that on a broader sense we're certainly moving the chemistry into that business into areas that we haven't been into before. We feel that we need to be hiring the marketing, the sales, and the technology in the manufacturing platforms to be able to access those and I think that we're making very good progress into those areas. Now how soon the Department of Defense or how soon the aerospace industry has a rather full plate right now with the volatility around a number of different issues. How soon they will be coming into the market and allowing us to come in the market I think that's open to debate right now. But I do think that over the course of 2020 that we will start seeing some of the dividends of that higher cost structure into the business taking effect.

Sounds good, thanks for the color there. And then I was hoping you could just talk a little bit more about the dynamics in the ethyleneamines business and especially your view going forward. I think one of your competitors is now talking about building a new world scale facility, so any comments there would be helpful?

Well we continue to look at where we can take that business and I think that we've got a number of very unique applications and grades in that business. We will continue to take that business further downstream and be looking for the lose lube oil additives and the end markets that will allow us to I would hope to have fewer competitors because of our innovation technology and longer contracts with our customers. And so that's really where we're moving. In a lot of these areas we go further and further downstream as we are in MDI, we are in advance materials. We are not competing with traditional -- with our traditional competitors that we're often compared to. I mean the area of polyurethanes, some of our competitors have announced system houses and moving down into system house and so forth, I still don't see really any head to head competition downstream because there are just so many hundreds of different routes that you can go when you start moving MDI chemistry or epoxy chemistry whether it's in coatings or heaters or elastomers. And so it will be interesting to -- yeah, when we look at the EAs and -- ethyleneamines we certainly will see some competition. But I think we've also got opportunities to further expand our downstream markets.

Great, thank you.

Thanks. Our next question is coming from Frank Mitsch from Fermium Research. Your line is now live.

Yes, good morning gentlemen. Hey Peter, appreciate the commentary that the fourth quarter EBITDA is going to be down 15% from the third quarter. Since we don't really have a history of monitoring this company on a pro forma basis I'm trying to reconcile how much of that is typical seasonality versus what is more germane to this economic backdrop and we heard earlier today from another company that suggested that October volumes were equal to September, is that a comment that you might be able to make as well?

Yeah first of all Frank, let me just express my condolences with the recent passing of your mom and she raised -- tough for me to perhaps a time she raised a great kid there. So I'm sorry to hear about that Frank.

Thank you very much Peter and I'm looking forward to some wonderful work coming out of the Huntsman Cancer Institute.

Well, we are two. As we look at our fourth quarter Frank, typically if you look seasonally just across the board you're seasonally down usually 15% to 20%. Usually the more commoditized end of that would be closer to 20% and the less commoditized would be closer to 15%. More commoditized closer to 20%. And I think that what -- where I'd be just a little uncertain right now is probably my biggest concern. Again as I sit here right now would probably be Europe and we heard rumors about automobile companies that typically shut down the last week or two and in December starting to shut down earlier in the year perhaps the 1st of December. So do we take those at face value right now, some of the OSV industry from what we understand some of the building materials and so forth might have some pretty healthy inventories right now. Longer term housing starts and so forth in North America the numbers look fairly decent. But depending on how much inventory you have going to the winner some of those customers might be slowing down a little bit earlier in December. Again I don't have the raw data in front of me to tell me exactly how much that's going to impact and so I think that's a bit of a shifting number. So I take out some of the commoditized end of around that 20% seasonality and I kind of come up with that 15% seasonality. I think with our more differentiated, less commoditized portfolio with what we've had I would hope that you're all going to see the seasonality in the fourth quarter. I would hope that over in the coming year or so that should start diminishing.

That's very helpful. And as I think about the stranded costs you called out 30 million in SG&A how do we think about overall strength of cost and in terms of a timeline of your ability to take that out of your results?

I think that it will be predominately in the second half of 2020. Again we want to make sure that we close on the business which we see taking place very shortly after the first of the year. And then we've got some a number of shared services, transitional services to look at as supplying to Indorama here over the course, particularly over the first half of the year. Then those will be diminishing throughout the year and as those diminish I think some of those costs frankly will be eliminated it outright and others then will be shifted as to how we can better focus the company. And I wouldn't be surprised if by the end of 2020 that we might have some completely different reporting structures and so forth within the company that would give shareholders greater transparency into the overall applications as we look at you know where we are in coatings, adhesives, elastomers, transportation, the aerospace industry, and so forth. You have construction, industrial, insulation. We're seeing more and more with our euro things, our epoxies, our amines, and so forth are really selling into complementary applications. And I look at something as simple as adhesives and a lot of times we'll see our MDI in competing formulations and applications with our epoxy. I can't think of a better company we'd rather compete with than ourselves. So as I look at some of those maybe we ought to be looking more and more at the downstream applications where we are less asset intensive, less asset focused, and more downstream focused on marketing growth and pricing excellent. So I think you're not just going to see a focus on eliminating costs which obviously we will continue to do but also on restructuring costs.

Very helpful, thank you Peter.

Thank you. Our next question today is coming from Mike Sison from Wells Fargo. Your line is now live.

Hey, good morning. For polyurethane your pro forma numbers for fiscal 2018 was a little over $800 million and looks like you'll be somewhere a little over 550 for this year on a pro forma basis. So just curious Peter when you think about at some point we exit the industrious session and things get better. Where can that polyurethane EBITDA go on a pro forma basis if times improve.

Yeah and as we look at 2018 that obviously was a banner year in MDI and I think we also saw the benefit of a fly off and so forth. I would hope that as we look at the volumes coming back, able to take advantage of the margins that we have in place I would certainly hope that as we look at that kind of that $800 million sort of number that we saw for 2018 that we can certainly be building on that number. Again as I look at kind of the recession scenario if you will in this company I think when we look at the last major 2008-2009 recession we saw our earnings drop at about 50%. And I would say that if we were to repeat that same sort of a scenario you're probably looking at somewhere between a 30% to 35% drop. What I'm saying is I think that we ought to be seeing less volatility, less falloff, and a more stable earnings platform. So I would hope that 800 million would be more of the norm. As we look at 2018 too I'd remind you that when you take out the spike that we're probably looking at a margin of around 15% in the business. And as we look at our downstream business our margin is around 20%. And so as you look at moving more and more of that to that downstream portfolio that's going to be essential to our growth, our expansion of margins, and more importantly the stability and the maintenance of those margins.

Okay, great and then real quick I think you mentioned you don't want to stretch your balance sheet but just curious a little bit of color there would you say it was a good opportunity, how far would you go in terms of the balance sheet, two times EBITDA, and then are there other opportunities outside of polyurethanes that are interesting for you to do some acquisitions?

Well there certainly are plenty of opportunities outside of polyurethanes. I think that when you just look at what percentage of our business is polyurethanes, MDI, and you look at the downstream growth that is taking place in a lot of those areas most of those acquisitions that we've done to date we have been our customers. And so we'll continue to focus in that area. Matter of fact if you look at over the last couple of years the bolt on acquisitions that we've done in our polyurethane business if I look at this kind of on an LTM basis we bought those businesses with today's EBITDA of around four times EBITDA and we're going to continue to look at those sort of opportunities. And as we find them in other ends of the businesses we certainly will be taking advantage of that as well. As we think about leverage levels and so forth, look we have thought if anybody who is listening to our calls last couple years knows that perhaps the most consistent basis is we want to have a strong balance sheet, we want to have a balance sheet where we can have access to the capital markets regardless of what's going on in the macroeconomic environment. And we want to keep to the investment grade metrics and so those are just fundamentally. I don't want to speculate as to what size of an acquisition and so forth or how it would be financed and what have you, just because at this point it's hypothetical. But I would say that we would certainly put limits on what we would do when we look at that threshold of investment grade.

Thank you

Thank you. Our next question is coming from Mike Harrison from Seaport Global. Your line is now live.

Hi, good morning. In the polyurethanes business you had the planned fire in Turkey, I believe there was also an outage in Rotterdam, and then I think you referenced about $5 million worth of drag from Geismar. But can you just walk through the overall EBITDA impact that you saw from outages in the quarter and let us know if there are any outages that we need to keep in mind for Q4 or I guess early 2020?

Well as we look at the Q4 we certainly don't see anything at this point. And between the second and third quarter we did see and that as we talked about last time that it took place in Rotterdam that was due to us third party supplier that went down they shut down a number of facilities that were in the Rotterdam area including ours. And Geismar we did see an outage there that affected the third quarter numbers as well. So when we look at the third quarter the total impact on that was right around $25 million between Rotterdam and Geismar. The fire that we had in Turkey we don't believe that that's sort of impacting our EBITDA in any material way. We've been able to source materials from our other system houses throughout the European and Eastern European area. A few weeks before that incident took place we opened up a new facility in Dubai that's going to be running very aggressively to supply the Turkish markets. I don't see us losing any business or materially any margins because of that and we will certainly be -- it is our intention at this time to rebuild that capacity.

Alright and then we are about a year since you started up the additional MDI capacity in China. Can you talk about how that facility has performed relative to your expectations and maybe give us an update on how you're progressing on shifting that polyurethane's business in China towards a more differentiated product slate?

Well I think it's fair to say that that I think that the product that has come out of there is very high quality. Reliability and operating rates have been very steady. The facility is sold out as of today and we have the ability to move those products downstream because of the splitting capacity that we have. And so I think that we will continue to shift our portfolio more and more downstream into formulated areas and so forth and that will be a multiyear effort. Right now we're selling into the component market and we will be shifting out of the component market this weekend and building up more and more of our downstream opportunity. But again we have the splitting capacity in play to be able to do that without further investments.

Alright, thanks very much.

Thank you, our next question today is coming from John Roberts from UBS. Your line is now live.

Thank you. On Slide 11 where you've got the key end market overlap textile effects has got consumer which doesn't overlap with anything else obviously and I'm guessing the automotive overlap is pretty small here. So with the weakness in the business do we need to have some additional, if you're running it for cash some additional restructuring here in right sizing or maybe more variablizing of the cost structure there?

No, I think that right now our biggest issue that we see in that business isn’t that the costs are out of line as much as is the demand and the deinventoring that is taking place. We see two things that are taking place in textile effects right now. One is the inventory that is taking place and frankly a lot of capacity in the textile industry is moving out of China, it is moving to India and Bangladesh, Pakistan, so you are seeing a dislocation of your customer base and you're also seeing a destocking that is taking place that we haven’t seen since 2008-2009 time period. Are we losing customers, no. Are we losing value in the products that we're selling, we don't see that taking place and I think that a lot of this is a short term a effect and in the coming quarters we think that will be recovering.

And then just a follow up and I apologize if I asked this earlier before but is the propylene oxide cost and the ethylene cost in the historical results essentially equivalent to what you're going to get with the Indorama contract post closing?

The transfer economics that we've had in the past will continue going into the future. We will not have the benefit of PO manufacturing economics in the polyurethanes business but the poly -- the propylene oxide we will not have the manufacturing benefit of the PO that is going to the MDI business. But the MDI in the past it's been transferred into that business into the system houses and so forth that will remain the same economics or say virtue of all of our products across the board with in-house and we try to always transfer those at a market or a most favored nation sort of pricing. We don't transfer them the cost.

Okay so the polyurethane segment this quarter doesn't have any benefit in the manufacturing margin? No, it is not.

Thank you.

Enough operator. We typically try to not take more than an hour of people time. I would take one more question if that's okay.

Certainly, our final question today is coming from the from P.J. Juvekar from Citi. Your line is now live.

Good morning Peter, this is Eric Ketrian [ph] on for P.J. Your polyurethanes volumes year-to-date has increased 5%. If I were to strip out the [indiscernible] plant start up what are your underlying volumes and then how do you see the industry demand finishing out 2019?

Yeah, we've seen in our MDI volumes growth for year-to-date including the third quarter, we see that total and our internal growth has been about 7%. And I see that what we've seen by and large Europe is up about 5% or 6%, the Americas is flat, and I would say that Asia wages up 24% but a lot of that's because of the new capacity that we've brought into the market. So, but I would say without that capacity it's probably flat to up slightly.

Helpful and secondly could you just give an overall description of utilization rates by region and if you see ability to push pricing in any of the regions?

Yeah, I would say that as we look at it globally I get a sense that the capacity utilization though I don't see a lot of data that is published in this area but just anecdotally it feels like it's around globally in the mid 80's and I would say you know the Americas were sold out in the Americas. Europe you're probably somewhere 90% maybe a few percentage points below that. And Asia I would say you're probably somewhere in the mid 70's to 80's somewhere in that area. And so I think that there is some room for -- I think that any monicum [ph] of GDP growth should be the catalyst when you're operating in most of your regions economically around the world of between 90% and 100%. It should be an environment for potential price increases. And in the chemical industry hope always springs eternal

Thank you.

Thank you.

We reached the end of our question-and-answer session. I would like to turn the floor back over to management for any further or closing comments.

Great, thanks Kevin. If you have any follow-up questions feel free to reach out to Investor Relations otherwise we'll talk to you next quarter. Thank you.

Thank you. This does conclude today's teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.