Peter Huntsman: Well, I think just in a nutshell, we’re continuing to see strong growth in both of those areas, mostly when we talk about international. We’re looking at the Middle East, and we’re looking at the U.K. Those are the two markets where we’ve got ready-made system houses that are making the raw materials. We’ve got the sales and marketing forces that are out and aggressive in these markets. I would say that Japan also should be, for us, a growing market in that area. But we’re starting from a very low base, but we have very high expectations on that. So I wouldn’t see material movement on our P&L because of the sales in those regions, but those are going to be growth markets that over the coming years. We’re going to see, I think, a real opportunity to change the business.
Operator: Our next questions come from the line of Hassan Ahmed with Alembic Global.
Hassan Ahmed : On the polyurethane side of things, obviously, a bunch of questions around trying to sort of forecast demand, obviously, in our industry is always challenging to do. But it seems that the supply side of thing’s easier to forecast, right? So as you sort of sit there and look at polyurethane, sort of cost curves. I mean, in the response to one of your earlier questions, you talked about how margins are same for some of the marginal producers. You guys, yourselves, reported 8% EBITDA margins this quarter. So I’m just trying to understand the marginal guys presumably are losing money right now. So with the supply looking the way it’s looking, I mean, do you forecast potentially shutdowns, more delays in capacity additions and the like and how will that play out as it pertains to a potential recovery going forward?
Peter Huntsman: I’m not sure that the recovery going forward is going to be dependent on any shutdowns. I am a bit surprised that, that hasn’t happened yet. As I look at the various regions, I look at the U.S. I don’t see a lot of shutdowns of total facilities in the U.S. because the major producers in the U.S. only have one facility. And I don’t see somebody exiting the North American market. And I think the same can be said for China. Now there are people that are like — that have multiple facilities in China but I personally just don’t see them shutting one of down. They’re very competitive. They start with foam and they work their way through on a competitive set of economics. Europe, in my opinion, longer term, when I look at the size of the facilities that are in Europe and the number of people that have multiple facilities in Europe, I do question the longer-term viability of some of those assets.
But again, I’m not privy to decisions that are made, obviously. In those companies, I don’t know what their economics are. To the degree that they’ve got longer-term contracts with government-assisted money or with unions and so forth, I have no idea what limitations there might be on that. But fundamentally, I think that the industry is shutting down lines more than they’re shutting down facilities. And I think you’re probably going to continue to see that.
Phil Lister: The only supply coming to the market, Hassan, will really be 1 month over the next sort of 4 to 5 years, but there’s nothing else major that’s been announced and if the industry returns to its 4.5%, 5% growth level, then that will have strip supply as a rebound occurs.
Hassan Ahmed : Makes sense. And as a follow-up, I mean, if we could sort of switch gears to the M&A side of things. Obviously, the balance sheet continues to look very good. And you guys have talked about inorganic opportunities and the like. I mean, look, in your prepared remarks, a fair date of sort of time was spent talking about the housing construction end market, the auto end market and the like. And as you guys look at the portfolio today, obviously, those end markets are sizable end markets for you guys, right? So rather than sort of — in the past, you’ve talked about potential M&A opportunities in Advanced Materials and the like. I mean, as you think about these inorganic opportunities, are you also thinking about potentially diversifying away from housing autos and construction, which are sizable end markets for you right now and in this market, at least tend to be a little shaky, maybe potentially diversifying away from those end markets?
Peter Huntsman: Well, I think that if you, pardon the cliche, that follows the money. Look where we’ve been investing our capital that we have internally is around producing cleaning materials for the chip industry, catalysts for polyurethanes and home insulation and so forth, looking at how we diversify further downstream in the MIRALON and so forth. When you look at our M&A over the last couple of years, it’s around Advanced Materials and how we not only get more but a more diverse field, a broader field of chemistry. And I think we’ve been publicly — if we haven’t said it publicly, I’ll say it now, as we prioritize where we see the world going, it’s going into a greener, it’s going into lightweighting, it’s going into adhesion.
It’s going into where our materials, particularly in Advanced Materials, but also PP and Performance Products and Polyurethanes, but we’re seeing particularly in Advanced Materials where that is going to be replacing ceramics, it’s going to be replacing traditional applications, composite materials and so forth. And those are going to be the areas of focus for us. So as soon as Phil can give me a 35% margin business that we can buy for 5x FDA, we’ll be moving pretty aggressively.
Operator: Our next questions come from the line of [indiscernible] with Bank of America.
Q – Unidentified Analyst: So as we’re talking about hopefully getting a volume recovery at some point, I think your variable decremental margins this quarter were in around 40% or somewhere in that range. Can you discuss how the decremental margins differ from within each segment and how essentially we would expect a volume recovery in each of the three businesses to flow down to EBITDA?
Phil Lister: Yes. I think we were more like year-on-year, about 30% to 35% overall on decrementals. So it’s good to talk to you, by the way. And then in terms of volume recovery, both Polyurethanes and PP have a real leverage here to a volume recovery as construction comes back overall and obviously, that will — and then most decremental margins. Advanced Materials, really linked into the country we made around aerospace and assuming that automotive continues on a decent global production to build that.
Q – Unidentified Analyst: Perfect. And just a follow-up on the raw materials for MDI, besides a well-known increase in benzene prices, can you provide us a little bit with what you are assuming for Q4 in each of the key regions, Europe, China and the U.S. for other key raw materials, chlorine, et cetera?
Phil Lister: Yes. I think we said — so we outlined benzene, we outlined natural gas was headed in Europe intended to 15. Chlorine caustic under a little bit of downward pressure overall, so we built that in. This will remain I think — which are the two main raw materials, although they still represent a minority of Advanced Materials is coming off as well. And then you’ve got ammonia, which is obviously a big raw material into Performance Products, which has been moving upwards. It moved down throughout the year, but it’s been moving upwards. That also impacts Polyurethanes in nitric — into nitric acid. So that’s the way to think about our raw material base pending still remains the biggest raw material that we purchase globally.
