Good morning, ladies and gentlemen, and welcome to the Q2 2018 Huntsman Corporation Earnings Conference Call. My name is Delina, and I'm your event manager. During the presentation, your lines will remain on listen-only. I would like to advise all parties, this conference is being recorded for replay purposes. And with that, I'd like to hand over to Ivan Marcuse, Vice President of Investor Relations.

Thank you, Delina, and good morning, everyone. I am Ivan Marcuse, Huntsman Corporation's Vice President of Investor Relations. Welcome to Huntsman's second quarter 2018 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 second quarter 2018 via press release and posted it to our website, huntsman.com. We also posted a set of slides on our website, which we'll 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, huntsman.com. In our earnings release this morning, we reported second quarter 2018 revenue of $2.4 billion, adjusted EBITDA of $415 million and adjusted earnings of $1.01 per diluted share. I'll now turn the call over to Peter Huntsman, our Chairman, President and CEO.

Thank you very much, Ivan. Good morning, everyone. Thank you for taking the time to join us this morning. Let's turn to slide number 3. Adjusted EBITDA for our Urethanes division for the second quarter was $269 million. Our MDI Urethanes business, which includes our propylene oxide, polyols, and systems businesses, recorded adjusted EBITDA of $246 million. This compares with $165 million of a year ago and $245 million for the previous quarter. Our MDI Urethanes business delivered 9% volume growth year-over-year. We grew our differentiated portfolio 13% year-over-year. Because of our ongoing portfolio shift downstream, we grew our component MDI 2% year-over-year. Demand remains strong and we continue to operate at a high rate of capacity, selling what we are able to produce. Let's turn to slide number 4. Fully consistent with our strategy, we continue to see robust growth in our downstream specialty and formulation businesses as we shift more MDI from components to systems. In the second quarter, we saw 13% year-over-year growth in volume within our differentiated systems business. As you know, on April 23, we completed the acquisition of Demilec, a downstream spray foam manufacturer in a high growth market. Excluding Demilec, we grew 10% year-over-year in our downstream business. Looking at growth regionally in the quarter, our Americas volumes increased 21%. Our recent acquisition of Demilec added about 5% to these volumes. The strong Americas volumes were primarily driven by our composite wood products, insulation and adhesive product sectors. With the continued startup of our new Chinese MDI capacity, we are shipping less MDI from the U.S. to China, helping to feed our growing North American customer base. Demand remains strong for our MDI in this region, driven by construction, housing and continued substitution for other materials. Asia volumes increased 8% versus the prior…

Thank you, Peter. Turning now to slide 10. In summary, each of our divisions showed good growth in EBITDA over the prior year period, including Performance Products after adjusting for the expected $15 million impact from our scheduled multi-year turnaround at our Port Neches, Texas site. Our adjusted EBITDA increased by $116 million or 38%. Price and volumes combined to offset increases in direct costs. A stronger euro versus the U.S. dollar resulted in a translation benefit of approximately $25 million versus the prior year. On a pro forma basis, adjusting for the outages, the spike in MDI margins, the favorable variance in MTBE, and excluding the impact of currency, adjusted EBITDA increased approximately 16% year-over-year. Versus the first quarter 2008, each of our businesses increased in EBITDA, including Performance Products, after adjusting for the planned turnaround impact already mentioned. Turning to slide 11, at the end of the quarter, our net debt leverage was 1.4 times and our liquidity was nearly $1.5 billion. As announced at our May 23 Investor Day in New York City, on May 21, we closed on a new $1.2 billion, five-year unsecured revolving credit facility that replaced our senior secured credit facility. This is an investment-grade style credit facility. We remain committed to maintaining an investment-grade profile and securing investment-grade ratings. We remain focused on generating strong, consistent free cash flow. In the second quarter, we generated $174 million of free cash flow, $20 million better than the second quarter of 2017, in spite of a prior year approximate $90 million one-time benefit from tax refunds. We remain focused on effectively managing and continuously improving our working capital. Our working capital metrics for the second quarter of 2018 were moderately better than 2017. As highlighted would be the case on previous period calls, this…

Thanks, Sean. Let's turn to slide number 12. Over the past year, our company has gone through a significant amount of change as we have separated our cyclical Pigments and Additives business, continued our downstream expansion, raised our margins and generated a cash conversion of 40% of EBITDA, allowing us to pay down a considerable amount of debt. We are now a company with balance sheet strength and flexibility, generating a substantial amount of cash from mostly differentiated and downstream businesses. Our portfolio's now more stable and consistent than what it has been in the past. In slide 12, we show the growth that our existing differentiated businesses have generated over the last several years. This steady growth has been previously masked for the most part by volatility in our cyclical businesses that have now either been sold, separated, or in the case of MTBE, currently are sitting at trough-type economics. We greatly appreciated the opportunity to host our Investor Day on May 23 of this year. We remain very confident in delivering on the 2020 plans that we shared with you then. We're committed to the significant value-creation upside of more than $27 per share by the end of 2020. We remain both focused and patient with the remaining monetization of our shares in Venator. Both our core business and balance sheet have been transformed. As you can see from slide 12, our core downstream differentiated business provide a platform for steady core organic growth ahead with Urethanes, our specialty Advanced Materials and Textile Effects businesses seen growing at double GDP, and our Performance Products 1.5 times GDP. We will see $11 per share upside from this core growth alone. As we discussed in detail at our recent Investor Day, we expect that these businesses will continue to show…

Absolutely. Thank you very much. And our first question in the line is from Kevin McCarthy. Please go ahead. Your line is open now, Kevin.

Yes. Good morning. Thank you and good morning. A few questions on MDI. Can you comment on how your assets are running thus far in the third quarter? Whether or not there was any spillover from the Rotterdam issue that you mentioned? And whether you have any planned outages in that business in the back half of the year?

We don't have any outages that I would consider to be material that should impact our earnings. I would just note in the second quarter the outages that we had were, for the most part, due to third-party operations and so forth. And this is something that will affect our MDI facilities as we are highly dependent on third-parties being able to supply our hydrogen and our oxygen and raw materials and so forth. But having said that, I think as we look at our Geismar facility, our MDI facility in North America, that is running strong at the present time. I don't foresee any issues there. Rotterdam continues to run well and our Chinese facility continues to come up as we had planned for it to come up. And I think we said, over the course of the last couple of quarters, we see that facility being capable of operating at full capacity by the end of 2018. And we will put those pounds into the market as it prudently needed. And just as a reminder, we used to have a fairly material section of our Geismar production that used to go to Asia to feed our growing Chinese appetite there. And obviously, as we have those pounds now coming back into North America, this is a concern that we posted a couple of quarters ago that we have quite a few of those pounds coming back into North America. I think it's fairly safe to say at this point, those pounds have come back to North America, they've come into the market and we feel that they've been placed effectively and efficiently in the market. And so I think that we really see regional production matching regional demand.

That's helpful. And then, Peter, as a follow-up, I realize you're only a bit more than three months into the integration of Demilec, but perhaps you could provide an update into how that's going and how your ambitions are progressing with regard to growth and cross-selling there?

Well, we initially – I think it was a quarter ago, when we announced the acquisition, we talked about being at a run rate of close to $40 million on an annualized basis by the end of the year. We continue to be pushing towards that and I think that we will meet that by the end of the year. Again, that is an improvement in the business as we look at the cost improvements that should come in the business, the integration should come in the business. I think our priority in 2019, going into 2020 will certainly be how do we globalize that business, and we've already taken steps introducing the products and the know-how and so forth in Europe and in Asia. That's not going to be an overnight success, but we feel very confident, if I had this acquisition to do all over again, I certainly would do it. And we are achieving the objectives that we set out. And so, I think it's gone very well thus far.

Thanks and congratulations on your results.

Thank you very much, Kevin.

Thank you very much. And the next question is from the line of Mike Sison. Please go ahead, Mike. Your line is open now.

Hey, guys, nice quarter.

Thank you, Mike.

The volume growth in differentiated MDI continues to look really good. If you think about the MDI demand, it's growing better than the market. Do you think that is sustainable over the next couple quarters? And maybe give us a little more color what's driving that growth?

Well, I would say that it is sustainable. There's no one particular area where – I'd say that if you kind of look at it on a regional basis is that where we're seeing a lot of the growth. It's largely in the U.S. where we're seeing strong construction in the U.S. and certainly benefiting from that. As we look at the downstream construction appetites, and we talk to those companies, I don't see in 2018 and 2019, as we look at the basic raw materials are going to OSB in the construction industry, I don't get a sense that there's a great deal of inventory neither on our end nor on the contractors ends that are making the OSB and making a lot of the paneling and boards and insulation and so forth. The demand right now in the construction field feels quite healthy in the Americas. I would also just note that a lot of the growth that we're seeing is also in product substitution. And as we continue to make inroads into the replacement of formaldehydes, the replacement of expandable polystyrene, and existing insulation materials, not all this is just GDP growth. I think as a rule of thumb – and again, I don't want to apply this just to any one particular quarter, but I've always kind of thought that as a rule of thumb, about half the growth that you see in demand in MDI is GDP-related and half of it is kind of product substitution-related. And I see that driver and I see that engine of product substitution remaining quite strong.

Okay, great. And a quick follow-up on the differentiated side of the business, as the short-term spike in margins or pricing, whatever you want to call it, fades in the second half of the year, would you expect the margins there to maybe expand or just stay stable?

I think that they're probably looking to expand. I think that we're facing with higher crude prices and so forth, we're facing a lot of raw material pressures. And so, any expansion that we're making, I think that it's important just to note that when we talk about those expansions, we're making them in the face of raw material price increases. As I look at our Advanced Materials group, year-over-year, quarter-over-quarter, we've absorbed about $5 million or $6 million in Advanced Materials, about the same amount in Textile Effects. So, the fact that we're looking in the third quarter of either kind of flat of a year ago or slightly up from a year ago, in reality, we've boosted margins $5 million, $6 million just to offset the cost of raw material. So that would certainly denote that there continues to be strong demand in those areas when you're able to take that large of raw material price increases.

Great. Thank you.

Thank you.

Thank you very much. And the next question is from the line of Hassan Ahmed. Please go ahead. Your line is open now.

Morning, Peter.

Hassan, how are you?

I am well. Thank you. Peter, obviously, a lot of back and forth about raw material price escalation and the like, and here you are sitting on a relatively pristine balance sheet and continue to generate very solid cash flow. Now, I understand you've talked about, in terms of M&A strategy, sort of bolt-on acquisitions further downstream and the like, but in light of some of this sort of raw material price escalation that we are seeing, broadly speaking, some of the sort of more specialty companies within chemical and – I mean, one of your sort of competitors was talking about, not in the polyurethane space, but within the specialty space, maybe considering a tie-up or a build-out of a greenfield methanol facility. So, what's your thought process in terms of maybe sort of upstream integration, particularly in light of some of the trends we are seeing here?

I don't believe that that's a prudent place for us to be putting our money. As I look at the raw material pressures that we see right now, I think that there are two factors that are pushing raw material prices up and I don't see them as long-term issues. One of them, of course, is the short-term demand and consumption of crude oil. I think OPEC's been a little more disciplined than they have been in past years, but what we're seeing in our oilfield services and so forth, I think that there'll be a wave of crude capacity that is coming on to the market in the next quarter or two. And I think crude oil prices probably – in my opinion, have probably peaked. It's stabilized and maybe even you're probably going to see some erosion in that pricing in the next couple of quarters here. The other raw material pressure that we're seeing is largely coming from Asia and it's raw material pressures that we're seeing on our Advanced Materials and in our Textile divisions. These are raw material price increases that are largely being implemented because of stricter environmental policy in China, in India, and throughout Southeast Asia. I think these are environmental changes personally that I applaud taking place. I don't like the short-term volatility, but I think longer term, these countries and regions are implementing the right decisions by enforcing these tougher environmental standards. Short-term, that's providing some volatility, but I think that these companies that are being shut down, they'll either be replaced or they'll make the investment and they'll come up as a stronger company. So, when I look at the raw material pressures that we're facing, and if I had to say am I better off trying to invest in new capacities or counter those raw material pressures, I don't see in both of the – in both the scenarios I just talked about, some of the specialty, raw materials, and so forth that we have had coming out of China and crude-related raw materials, I don't see either one of those as being long-term issues that are going be elevated for the next couple of years.

Understood, understood. Now, as a follow-up, obviously, within Performance Products the turnaround behind us, but one of the things you guys talked about in the press release was the division or the segment benefiting from continued strength within glycol. Can you just talk a bit about what your views are about the sustainability of this sort of strong glycol margins that we're seeing today?

Yeah, let's remember – I don't want Huntsman to be thought of as an ethylene glycol company. I mean we do (00:34:31)

No, no, I know. I know. But enough has been talked about on the MDI side, so hence I'm sort of -

Yeah. As we think about glycol today, remember that about 75% of our glycols are locked-in on a tolling basis where we'll never make the peak that's out there nor will we ever lose the money that potentially can be lost in glycol, and about 25% of the glycol we produce is on a margin-sharing basis. And so, we'll benefit from some of the upside, and in some of the downside, we'd try to cap that downside with the tolling base floor. But I think longer term, as I've said it in my comments, I don't see that as being sustainable for the next couple of years. I see it being sustainable for the next few quarters. I don't (00:35:21) think there is going to be glycol tightness and so forth. And demand right now in Asia is particularly strong in polyester and some of the textiles we're seeing.

Very helpful, Peter. Thank you so much.

Thank you.

Thanks very much. The next question is from the line of Jeff Zekauskas. Please go ahead, Jeff. Your line is open now.

Thanks very much. I think in your prepared remarks, you said that your third quarter Polyurethanes EBITDA as best as you could tell would be below the $245 million that you reported last year. Can you talk about the sequential degradation in EBITDA? And I suppose the fourth quarter would be weaker still on a sequential basis for seasonal reasons, or is that not correct?

Well, I think that what we're really trying to point out in EBITDA when we talked about our MDI is the effects of the fly-up that we site. I'd ask you, Jeff, to go to slide number 5. I think it's a very interesting slide. And if I had to pick out one slide in the deck, well, they're all great slides...

Yeah.

... slide 5, I think we tried to break out to kind of show the market, because there were some press reports a month or so ago that I think gave kind of a misleading guide that MDI prices were collapsing in Europe or in China and so forth, and we tried to break out on this slide number 5 the – you can see the impact. It's about 30 – that red line, depending on region, depending on the blend, depending on the application, that red line is anywhere from 30% to 40% of our business in the regions and so forth. And the solid dark line is kind of the all of our other margins. And if you look globally and you look at that solid dark line there, it's a very steady foundation to the business. And when you look at what we're talking about on that short-term spike margins, look at Asia and look at Europe. And Asia largely has come back down to, I'd say, to normalized margins. As a matter of fact, as I look at Asia component commodity prices today, if anything, Asian prices are inching up a little bit, and as I look at that spike that we saw about a year ago this time, again, really just getting back to normal. And so, when we talk about being equal to or down from a year ago in Polyurethanes, I just want to make sure that it's not the overall business, it's not the foundation of the business, it's not the overall strength of the business, it really is just that spike that's being moderated. And that's what we're going to see. It's the last of that fly-up spike.

Okay, great. Thank you for that. And your corporate costs were lower, I think, by about $11 million in the second quarter. And if you look last year, your corporate costs were quite high in the fourth quarter. Is there some positive variance that we might see? And what was your MTBE EBITDA in the second quarter?

Jeff, I'll take the corporate costs questions. This is Sean.

Sure.

I will tell you, what you see in corporate costs is a little bit of LIFO change. And you'll see that in the second quarter we actually had a benefit of LIFO, and year-over-year, I think that amounts to around a $6 million benefit.

Yeah.

So that LIFO does have a chance to move those corporate costs a bit. Overall, I don't see much of a change really in our fixed costs that fall into corporate. So that would be the biggest change there. And then, as far as the MTBE EBITDA for the quarter, we're looking at an MTBE EBITDA of $23 million.

And, Jeff, that MTBE was versus the last year of about $2 million, $3 million. I think as we look at the third quarter, as you see look at butane prices mysteriously going up $0.20, $0.25 a gallon on a couple of hours a few weeks ago, I always get leery when I see jumps like that, the sustainability of them. But obviously, that's cutting into MTBE margins in the third quarter. And if those sort of prices hold in raw materials, I think that you'll see MTBE in the third quarter look pretty similar to the second quarter of last year, making a few million dollars on it.

Okay, great. Thank you so much.

Thank you very much. The next question is from the line of Alex Yefremov. Please go ahead, Alex. Your line is open now.

Good morning. Thank you. Peter, I just wanted to go back to slide 5. In Europe, it shows an increase in margin at least in July. And if we look at sort of independent price services, they've talked about a price decline. Is it a correct way to read that that you've actually in your system in both components and systems saw a margin and price increase?

Yeah. So as we look at the business right now, we're seeing decent to strong demand in Europe. And also, mind you, in the second quarter, we did suffer a bit of outage in our own facility in Rotterdam, so thinking we were short materials. And the MDI right now, it feels tight in Europe. Also, there'll be a little bit in those numbers when you look at that increase, a little bit of that's going to be around product mix as well. We saw very good automotive demand. And our footwear, our ACE business, coatings and elastomers, adhesives business was strong. And so, some of that upward trend is going be supply/demand related. Some of that's going be the mix of the products where we're seeing particularly strong demand in the second quarter.

Got it. Thank you. And then on the systems pricing, as you sign new contracts in systems or you extend existing contracts, are your margins generally higher than what they were before or your average margin? So, what's just the direction of that systems margins?

I think we have an opportunity to make it a little bit higher than before. And Alex, as we look at the business, I think what we really want to see in MDI is sustainability. And if we have an opportunity to go in and lock in short-term price for a longer-term, but longer-term that's going to force the customer to look for competing products or something like that, we don't want to be in that situation. So, we want to be selling value. You want to be selling your cost. You want to be selling your service. You want to be selling your effect. And all of those come together to make a price. But I think, by and large, as we look at the strength of MDI, we probably have more of an opportunity to gradually move up margins on these systems as they're being renegotiated than not.

Thank you, Peter.

Thank you very much. And the next question is from the line of John Roberts. Please go ahead, John.

Thank you. Peter, as Chairman of Venator and the largest shareholder, could you give us your thoughts at least on what's going on there with the recent strategic developments and any updated thoughts on Huntsman's eventual exit?

Well, again, we continue to look at the overall industry of TiO2. I think that industry has either been feast or famine. And I think as you look at the structure of the business, the pricing of raw materials and so forth, and again, I'll just speak from my own opinion of it, I think that we're in something of a bumpy plateau in pricing and you'll see typical seasonality in the third and fourth quarter, but, by and large, you're seeing consolidation in the industry. I think that you're seeing – especially at Venator, you're seeing expansion in specialty applications and grades. You're seeing management continue to focus on costs and so forth. And I continue to be a great believer in Venator. I think it's a great company and it's in an improving industry in TiO2 and Pigments. As far as Huntsman, I would just say that we would continue to stand behind the comments that we've made in the past. And given issues around public disclosures and so forth, I wouldn't want to speculate in timing as to when or how we might monetize the remaining 53%, only to say that that continues to be a priority of Huntsman. And I think longer terms, it's going to be – we're looking for the long-term opportunity to our shareholders.

And then secondly, at the Investor Day, you expressed a hope to reduce the volatility of MTBE on earnings in the future. Would you be willing to structure something to reduce volatility now even though we're near the trough and you might not be able to get mid-cycle economics?

Well, look, I'd be willing to look at just about anything with MTBE. I'd just remind our shareholders and investors that our MTBE is not a standalone entity. The product that it produces that we're highly dependent on is propylene oxide, which is a raw material, it's a component for our Polyurethane systems. So, as I look at our propylene oxide and MTBE – I'm not sure, I think you have to go back several years to find a quarter when the combination of propylene oxide and MTBE haven't been a very strong contributor to our overall business. Having said that, with MTBE, if we had an opportunity to look at locking in margins or taking some of the volatility out, sure, we certainly would look at it. I don't – as I look at the long-term value around MTBE, I'm not sure that anytime soon it's going to get back to that earnings platform of $100 million to $200 million a year.

Thank you.

Thank you very much. The next question is coming from the line of Matthew Blair. Please go ahead. Your line is open now. Matthew Blair - Tudor, Pickering, Holt & Co. Securities, Inc.: Good morning, Peter. You mentioned that Textile Effects had showed nine quarters in a row of volume growth. We also noticed that pricing was up for the first time since 2015, I believe. What drove the increase here? And do you think it's sustainable?

Yes, I think it's sustainable. I think it's a combination of raw materials pushing pricing up and it's also mix that is pushing. I think as you look at new applications and new products that are going into the market, it's something that is very important to the business. And I think that as we also push downstream, when I say push downstream, I mean pushing with the properties downstream and also in the more specialty applications and working directly with the retailers. It used to be that we'd sell our products to a mill, the mill would sell to a broker, a broker then would sell to another broker, who usually would then sell to a retailer that – names that everybody would be very familiar with. And I think that the retailers are taking much greater responsibility of their environmental performance, the working conditions and so forth. And so now, we're working directly with the retailers where they're going back to the mills and specifying that they want certain colors, certain grades, certain environmental standards and so forth that maybe weren't so important a couple of years ago that are more important today. So, a combination of better supply chain opportunities, more specialized products and mix, and obviously, raw material prices going up pushing prices up as well. Matthew Blair - Tudor, Pickering, Holt & Co. Securities, Inc.: Sounds good. And then, next question might be for Sean. But it looks like the year-to-date trends in tax – your tax rate, as well as your CapEx, are coming in what would be well below what's implied by your full year guidance. What causes tax and CapEx to really step up in the back half of the year?

Well, typically, and as we look at our business, and this happens usually year-to-year, it's nothing different this year, capital spending goes up pretty much as you approve budgets towards the end of the year. And then, you get them sort of sanctioned in the beginning of the year and you start spending on these new projects. And so, as it goes through the year, the spending ramps up, and usually that fourth quarter of the year, you'll see as much as 30% to 40% of the total budget being spent in the last quarter of the year. So, there's no surprises as we look at capital expenditures. And as it relates to taxes, I think we've guided here about 20% to 22%. We hit an 18% rate in the third quarter, a little bit lower than we said we would. It's book tax differences. There's some small stuff there. And it's a better use of maybe some of our valuation allowances that we had in the third quarter. But I do expect in the fourth quarter you'll see us returning back to that sort of rate that will put us in a 20-percentage year-end sort of conclusion. Matthew Blair - Tudor, Pickering, Holt & Co. Securities, Inc.: Great. Thank you.

Thank you. And the next question is from the line of Arun Viswanathan. Please go ahead.

Great. Thanks. Good morning. Just a question on MDI going back to the issue around Europe and Asia. Would you expect a similar impact from some recent force majeures in the industry that you saw versus last year, or is this a much more minor issue? Thanks.

I want to make sure I understand the question. You're talking about the impact of force majeures on the industry and the impact that's having on pricing?

That's right.

Okay. Yeah. The force majeures, certainly when you're operating at around – I think the overall industry's probably operating around 90% globally capacity utilization, probably a little bit tighter in North America, fairly tight in Europe and less so in Asia. And when you look at – this is largely – mind you that MDI is largely a regional supply and demand. MDI is a tough product to put on a boat and oftentimes, depending on the grades, have to be shipped cryogenically, has to be stored cryogenically. You don't see massive MDI volumes moving around the world, especially in the downstream differentiated higher grades of MDI. So, when you see a facility that is 400,000 or 500,000 tons of capacity go down in a particular region, that 400,000 or 500,000 ton facility can account for several percentage points, and often that region can go from the low-90s up to the mid-90s or even the high 90% capacity utilization. So, I think it's a regional issue. It's a timing issue. It's a seasonal issue. And what impact that has on the market and so forth, I think, is probably – I mean it certainly is there. And it's certainly is there, particularly the component side of the business. I think of our downstream systems end of the business, as you can see, again, going back on slide number 5, you don't see a great deal of volatility in margins on that downstream differentiated end where we're focused. And so, I would say that on a margin side on the majority of our business, those force majeures and so forth we're seeing globally don't have near the impact of just focusing on the downstream steadiness and the margin where we want to grow the business.

Great. And then, you noted earlier that kind of upstream capacity expansion isn't really something in your best interests. What options do you have to expand downstream in MDI and Polyurethanes? I mean, obviously, you have the buy options and you proved that with Demilec. Are there further options like that in the imminent future? And then, furthermore, are there options organically to increase your downstream exposure? Thanks.

Frankly, I would see that being a good mix between organic growth and looking at our downstream growth. And as we look at one of our bigger areas of our downstream opportunity and our elastomers and so forth, we have opportunities where we bought an asset in North America and now we're taking that know-how to Asia and we're taking that know-how around the world. And so, oftentimes, we'll see – for instance, with Demilec, we bought an asset, we bought manufacturing facilities and then we'll take that and organically grow the business. So, the growth that I see taking place downstream in MDI is going to be a combination of growing and acquiring new technologies, customers, know-how and applications and then growing that in a – buying a regional player and then globalizing as quickly as possible. And so, I wouldn't want to sit here and say that the majority of our growth is going to come organically or is going to come through acquisition. I think it's going to be a combination of the two.

Okay. Thanks.

Thank you. The next question is coming from the line of Jim Sheehan. Please go ahead.

Thank you. You've commented that multiples seem to be elevated in the acquisition market or the bolt-on area that you're considering. So, given that context, how do you think about the balance of share buybacks versus M&A here?

Well, I think we'll, Jim, have to look at that on a quarter-to-quarter and almost on a deal-by-deal basis. Again, I don't mind paying a higher price for an acquisition if we see very clear opportunities to acquire new technology, globalize that business, we have synergies and we have supply-chain pull-through economics. And so, as we look at that, we look at it on an IRR basis. And if we can just justify a higher price, fine, we'll be willing to pay that higher price. But I just – I have an aversion to just chasing assets just because they're on the market. So, we will continue to be very careful looking at that. And likewise, when we buy-in shares, I think it would be rather foolish for us to just say we're going to buy-in the same number of shares regardless of the price, quarter after quarter after quarter. We'll look at how we compare to our peers, we'll look at the overall industry, we'll look at our overall cash flow and we'll make decisions on an ongoing basis. I wish it were as easy as just saying we'll buy X million of shares every quarter, but I'm not sure that's the most prudent use of capital. We've got to look at a number of issues. We saw raw material prices spike right now and we saw demand coming for our working capital, we might want to slow down share repurchase and so forth and make sure that we're preserving the matrix of our balance sheet. So, I think all of those – I mean, I hate to sound evasive, but I think all of those are issues that we look at and take into effect.

Great. And in terms of your outlook commentary on the third quarter, what are you guys assuming for currency impacts, positive or negative?

Yeah. Jim, we've had clearly some benefits. We talked about $25 million year-over-year. If you look last year in the third quarter, you kind of see the euro rate pretty much on par with where we see it today. So, from a year-to-year comparison, probably pretty neutral.

Thank you.

Thank you very much. And the next question is coming from the line of P.J. Juvekar. Please go ahead. Your line is open now.

Yes, Thank you. Good morning. Peter, can you talk about MTBE outlook beyond sort of third and fourth quarter? If you look out, do you think demand for oxygenated goes up over time? And then secondly, what is the impact of IMO 2020 on MTBE demand?

I'm sorry, IMO 2020?

Yes, IMO 2020, do you think that benefits MTBE?

I think it's probably going to have a neutral impact on MTBE. It might push margins up just a little bit and demand up a little bit, but I think, by and large, it's probably going to be fairly neutral. And as we look at MTBE, I think it continues to be a great product. And it's going to satisfy – I mean, when I compare it to ethanol and some of the other oxygenates that are out there, it's doing exactly what it's designed to do. It's a clean-burning oxygenated fuel and it's too bad that this country doesn't have a better energy policy that would include MTBE, but we'll continue to ship it overseas and ship it to markets where it's improving the characteristics of gasoline and it's improving the environment.

Okay. And then, my second question is on epoxies. Can you talk about supply/demand in epoxies, both on the liquid bulk side and sort of more differentiated epoxies and what's the split there?

Well, kind of tough for me to comment on the BLR on the bulk side. As you know, we've gotten out of most of that and I think it's the right decision. There'll probably be the occasional quarter when there's a short-term tightness or something where people may say, well, it's too bad you got out of it, but I think, by and large, it's a product that we're glad we're out of it. And we're focused on the downstream and we're focused on applications. Quite frankly, when I look at our electronics, our coatings, construction, our aerospace, transportation, these really, again, don't have a great bearing, the margins don't on supply and demand, on capacity utilization. In many of these applications, we're in for a multi-year basis. We're one of maybe one or two suppliers globally that can make the products that we're making and we're going to continue to look at the nanotechnologies and so forth as we go further downstream, and in our Advanced Materials. And I think that we tried to highlight in our Investor Day, I think, a very significant issue is we never said the word epoxy when we went over entire presentation as to where we see Advanced Materials going. So, I think we see epoxy as a component of that business. It's going to create value going downstream, but as far as BLR and the basic epoxy resin industry, good riddance.

Great. Thank you.

Thank you very much. And the next question is coming from the line of Mike Leithead. Please go ahead. Your line is open now.

Thanks for squeezing me in here. I guess following up on Advanced Materials, first, can you just talk through the dynamics you're seeing on the wind market today? I think you flagged that in your earnings release. And second, can you maybe talk about how you're progressing on price versus raws in the segment?

Well, I'm quite – as I look in the second and the third quarter, as I think I said earlier, in the second and third quarter, we'll be taking in about $6 million, $5 million, $6 million of raw materials. So, we've got to be raising our prices at least that amount. And again, as I said earlier, we take a lot of our applications. We're not selling it necessarily on the cost of raw materials. So typically, when raw materials go up, that's a real pressure on margins. When they go down, it's a real opportunity to expand margins. Again, we're looking for sustainability and pricing long-term agreements and so forth. Having said that, the markets are such that, I think, that as we look at our third quarter performance in our Advanced Materials, we remain confident that even though we will have taken in $5 million, $6 million of price increases versus last year, we ought to do as well as we did last year in our Advanced Materials and get our pricing up to offset that. On the wind side, I think it's a near breakeven and it's a business for us, as we look at the volumes in wind, we continue to reduce our sales into this application. It's a commoditized application. And I would never say that any customer segment is bad. I just don't see it as having the opportunity to expand the margins and have a sustainability of growth in earnings that we see in so many of our other applications and grades.

Great. And then, with Venator's impairment this morning of the Augusta color pigment facility, what's the latest status of your suit against Rockwood or I guess now Albemarle regarding that facility? Thanks.

We continue to move through the U.S. legal system, which moves at the pace of about a python going across the Sahara. So, I think that we still have a – I'm still very optimistic. I think I think that our case is very sound. It's very unfortunate that where we find ourselves after acquiring those assets. But at this point, as we're in ongoing litigation, probably best for me not to comment.

Thanks, Peter.

Thank you. And operator, why don't we take one more question. We're over the one-hour mark. We'll conclude here with one more question.

Thank you very much. So, the last question is from the line of Roger Spitz. Please go ahead, Roger. Your line's open now.

Thanks, and good morning. In Performance Products, how much of a benefit did you receive from the lower ethylene and perhaps ammonia price levels?

It's a very good question, Roger. I'll look over to Sean in hopes that he has some better guidance on that. I would just estimate that as we look at raw materials, as you look at ethylene price levels, I think it's pretty flat. I'm not sure that we benefited a great deal from that. And we look at ethane pricings and so forth versus where we were the previous quarter, I don't think there was in that much benefit.

Thanks very much, Peter.

Thank you. Operator I think that pretty much concludes the call here.

Thank you for joining us. We look forward to updating you next quarter. If you have any questions, feel free to reach out to Huntsman Investor Relations. Thank you.