Peter Huntsman: And certainly, the most volatile — a lot of those products that Phil just mentioned on longer-term contracts or pass-through contracts with natural gas and so forth.
Operator: Our next questions come from the line of Matthew Blair with Tudor, Pickering, Holt & Company.
Matthew Blair: Peter, so it’s obviously a tough market, but your prepared comments did mention that building solutions volumes were up both quarter-over-quarter as well as year-over-year. So I don’t know that seems encouraging in the tough construction market. Should that be the read-through for investors? And do you have any more color here? And also, is this because you’re gaining share in the spray foam market or are there other dynamics at play?
Peter Huntsman: Well, a couple of things. First of all, last year, third quarter was a pretty tough year. I mean, it was a low point, I think, as we look at the overall business. But as you look at the third quarter, we’re up 2% from — versus the prior quarter. We’re up 10% a year ago. If you look at some of our other products like the composite wood products and so forth, as we look at the order patterns thus far into fourth quarter, and I don’t want to get ahead of myself, but we’re seeing a positive year-on-year comparison there. And that’s the first time we’ve seen a positive comparison there for probably over a year on a quarterly basis. So again, I’m not — I don’t want to get overly encouraged by this, but these are signs you first have to hit the bottom, and then you’re going to see a bounce back.
So as I look at things from where we are in the third quarter, I think there’s some positive signs I’m seeing in HBS and the building solutions, all around in — areas around our total insulation business. From the prior quarter, it was up 3%. From a year ago and again, this isn’t just spray foam. This is our installation that goes into rigid panels, construction panels and so forth, we’re down 4% over a year ago but up 3% sequentially. So starting to see, I think, signs that we’re hitting the bottom in some of these areas, and I’d like to think that we’re recovering in others of them. So I would take those as — we call them green shoots, but I think it’s a tired metaphor because we’ve used it now the course in — and we haven’t seen much more than green shoots.
But no, I think there’s probably more of those we see today than we did certainly a quarter ago.
Matthew Blair: Okay. That’s helpful. And then you mentioned some challenges from rising European natural gas prices. Do you have any hedges in place? Or is there anything you’re doing today to mitigate potential price spikes in the winter?
Peter Huntsman: We do a little bit. I wouldn’t say that they’re material. It will protect us from the absolute highs and lows and so forth. But look, I think that those — spikes like that are going to impact us as a company on the short term. But I think longer term, what the reverberations of the very poor energy policy that you see in Europe is the longer term of what that does for consumers, what it does for confidence in the macro economy, what it does for our customer base that is more energy-intensive customer base. And so I — the gas pipes, yes, I think that we’ve got some protection in there, but not a great deal. My bigger concern is what happens to the macro economy there.
Operator: Our next questions come from the line of Josh Spector with UBS.
Josh Spector : I wanted to zero in Advanced Materials, I guess. If you look at your volumes there, you’re down something like 40% versus 2019. Obviously, you’ve talked about aero and that has an impact about how that recovers. But when you look at the rest, how — that gap is maybe some lost volumes because it’s no longer competitive to play there destocking? And where would you see the market is? And my follow-up with that is your EBITDA is actually not terribly far off 2019. So your unit margins are doing much better. Is that a silver lining about where profitability would be when volumes improve? Or is that not the right way to look at it?
Peter Huntsman: I think that as you look at that business, two things to keep in mind. One, we’ve been getting out of the BLR business. So in a lot of the downstream differentiated specialty ends of Advanced Materials, we’ve actually seen very good growth in those areas. I mentioned earlier about some of the components that are going into the EV sports cars and so forth. On the other hand, we’ve been getting out of the bulk liquid resins and that is a business, if you go back 5, 10 years ago, that’s what made up the vast majority of Advanced Materials. So we’ve been getting out of large volume, low-margin accounts we’ve been getting. So when you look at the business overall, it doesn’t look like there’s, if anything, as you said earlier, you’ve seen negative growth.
But the quality of what we’re building, the quality of the core of the business, it continues to grow very aggressively in that division, continues to be very firm and to be very strong. I’d also note that since 2019, we’ve had two large acquisitions in that business that have — I think, have both been very successful and both integrating those acquisitions in — from a cost point of view. But now that we’re done with the cost synergies, more importantly now is the longer-term market opportunity and what are the customers and applications that this allows us to compete in. And that’s — I think that’s as we look at Advanced Materials on the longer term. But if we find good value M&A opportunities there, that certainly is going to continue to be a high priority for us.
Operator: Our next questions come from the line of Laurence Alexander with Jefferies.
Laurence Alexander : Could you give a little bit more color on what you think the — is going on behind the stutter in the EV market? To what degree your customers are rethinking their structural or their fundamental assumptions? And then secondly, can you just talk a little bit about how you think about working capital days, both next year and kind of where — and also where you think kind of mid-cycle should be as your portfolio has been evolving?
Peter Huntsman: Laurence, very good question. I’m going to let Phil comment on the working capital inventory issues. On the EV side, I’m not going to say that I’m concerned, but if I look at that entire chain, and you see some of these car manufacturers, I think with the exception of Tesla that was built largely on the back of billions of dollars of federal green credits that other companies bought from them. I mean, it’s only been relatively recently that Tesla is making money on their EV cars in the last couple of years. They’ve obviously built an excellent vehicle. But as you look at the overall EV markets, I’m not sure that on a stand-alone basis, and when you look at some of the more recent earnings on some of these EVs, some of these companies are losing tens of thousands of dollars per vehicle.
And they say, well, then it’s a question of volume, but the volume doesn’t seem to be coming. And then you look at the supply chain, where’s the money being made in the supply chain and seemingly are the components going into the batteries themselves. And that seems to be where the money is being made. And who controls the EV components. Well, the Chinese, I think, have done an excellent job in the last 15 years of developing that supply chain, the refining, the mining, the processing, the expertise in that area and give them credit for what they’ve done. So Laurence, all of those things I just outlined, that’s well above our pay grade, at least, mine as far as where the EV markets are going. But as I look at the applications going into an EV, any EV vehicle is going to need a couple of basic issues.
