Huntsman Corp (HUN) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the first quarter 2010 Huntsman Corporation earnings conference call. My name is Chanel and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question and answer session at the end of the conference. (Operator Instructions). As a reminder, this call is being recorded for replay purposes.

I would like to turn the call over to Mr. Kurt Ogden, Vice President of Investor Relations. Please proceed.

Thank you. Good morning, everyone. Welcome to Huntsman investor's conference call for the first quarter 2010. Joining us on the call today are Peter Huntsman, President and CEO, and Kimo Esplin, Executive Vice President and CFO.

This morning, before the market opened, we released our earnings for the first quarter 2010 via press release and posted it on our website, www.Huntsman.com. We also posted a set of slides on our website, which we intend to use on the call this morning in the discussion of 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 Securities and Exchange Commission 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. In addition, we may also refer to non-GAAP financial measures. You can find reconciliations to the most directly comparable GAAP financial measures in our earnings release posted on our website at www.Huntsman.com.

Following my comments, Peter Huntsman will review the recent performance for each of our divisions, after which Kimo Esplin will address certain business trends and financial-related items, and then Peter will provide concluding thoughts. At the conclusion of our prepared remarks, we look forward to taking questions from you. As we refer to earnings, we will be referring to adjusted EBITDA, which is EBITDA adjusted to exclude the impact of discontinued operations, restructuring impairment and plant closing costs, income and expense associated with the terminated merger and related litigation acquisition-related expenses, unallocated foreign exchange gains and losses, losses from the early extinguishment of debt, extraordinary gains and losses on the acquisition of a business, and losses and gains on disposition of businesses and assets. We focus on adjusted EBITDA from a management standpoint, as we believe it's the best issue of the underlying performance of operations. We have received feedback from many of you in the investment community that this is how you prefer to look at the business. A reconciliation of EBITDA, adjusted EBITDA and adjusted net loss/income can be found in the appendix of our slides and in our fourth quarter earnings release.

Let's turn to slide three. In our earnings release this morning, we reported first quarter 2010 revenue of $2.094 billion. Adjusted EBITDA of $123 million and adjusted earnings per share of $0.07 loss per diluted share. Our adjusted EBITDA increased to $123 million in the first quarter 2010 compared to $57 million in the prior year and decreased from $174 million in the prior quarter. Both prior-period figures have been adjusted to account for the reclass of results from our Australian Styrenics business into discontinued operations. Our first quarter 2010 results were negatively impacted by $51 million of production disruptions; $40 million was the result of our planned maintenance outage at our Port Neches, Texas, POMTBE facility, and $11 million was the results of mechanical shutdowns at our separate Port Neches, Texas, ethylene facility.

With that, I will turn the call over to Peter Huntsman, our CEO, who will discuss the results in more detail.

Thank you very much and thank you all for joining us this morning.

Let's turn to slide four. Our polyurethane's adjusted EBITDA results of $52 million were nearly doubled from the prior year despite the negative impact of $40 million from our planned maintenance outage in our Port Neches, Texas, propylene oxide MTBE facility which was completed in March. It had been six years since this facility was last shut down for this type of maintenance, and we should not see this magnitude of planned production disruption for another six years.

Huntsman's global demand for MDI increased 35% in the first quarter compared to the prior year. We continue to see tremendous growth in Asia. Chinese stimulus, government stimulus initiatives targeting infrastructure investment and domestic consumption are a significant driver, but we're seeing strong domestic demand that are quite unrelated to what the Chinese government is promoting. Demand in the Americas improved significantly compared to the prior year as signs of economic recovery are manifested in insulation, automotive and other sectors. We're also seeing increased MDI substitution of formaldehyde resins and wood products and for PDI in cushioning applications. In Europe, our largest market, we saw substantial year-over-year recovery in demand, albeit somewhat hampered due to colder than normal weather. Notable increases were seen across the sector, not as affected by weather, including automotive, adhesives, coatings, appliances, and furniture. We are also pleased with the growth in India and Eastern Europe that we're seeing.

We continue to see healthy demand for MTBE outside the United States. We produce propylene oxide and MTBE at our Port Neches facility which was shut down for most of the quarter for a planned maintenance mentioned earlier. Contribution margins for MTBE during the quarter were in line with historical levels but lower than 2009. Supply-demand levels remain tight, even with new volume restarting which, we believe only served to replace some of the capacity which was switched from MTBE to ETBE production. Since the beginning of the second quarter, this facility has been operating at full capacity.

If you turn to slide five, let's talk about our Performance Products division. Our earnings in our Performance Products division were in line with the prior year despite suffering the negative impact of two unplanned mechanical shutdowns during the quarter which totaled $11 million for a key amines and surfactants raw material. The performance specialty businesses which represent around 50% of our divisions earnings saw strong improvement in underlying demand across virtually all markets. The first quarter sales volumes increased 26% compared to the prior year primarily driven by strong demand in the Asia-Pacific region for our amines products. The announced completion of our ethylene amines joint venture facility in Jubail, Saudi Arabia, with our partner the Zamil Group this past February -- the plant commissioning is almost complete and we'll be soon delivering the product. Our share in the joint venture is 50%; however, we expect to consolidate the joint venture results within our financials after commissioning. Within our performance intermediates and maleic and hydride businesses, we're seeing steady improvements in global customer demand, albeit at lower levels than in specialties. We continue to increase our selling price to offset the increase as we're seeing in raw materials.

Let's turn to slide six. Adjusted EBITDA for our advanced materials division in the first quarter was $31 million, nearly three times the prior-year result. Demand within our core formulated systems and specialty components businesses combined improved 22% compared to the prior year. We saw significant increases in volume within our coatings, automotive, electronics, aerospace space and general industry markets. Our base liquid resins business is more commodetized and represents 15% to 20% of the advanced materials revenue. Within this business, we saw demand improve 37%; however, the negative impact of increased raw material costs on the bottom line more than offset the positive effect of the improved volume on the top-line.

Turning to slide seven, our Textile Effects division had break-even earnings in the first quarter, which represents a pivotal point for this business. Retail sales data published recently suggests that rising numbers of consumers are returning to stores and are purchasing clothing and apparel items. This increased demand was reflected in our first quarter sales as volumes increased 18% compared to the prior year. We saw volume increases in apparels and home textiles as well as specialty textiles across all global regions. Our product mix has improved from the previous year as well. We have been focused on select market segments where we believed that customers are willing to pay for the innovation and technical support we're able to provide. As a result, our underlying sales product mix has improved along with the return in general demand. This business has undergone dramatic restructure efforts over the last few years from a cost perspective as well. From December 2008 through the end of 2009, we reduced our fixed costs by more than $60 million. We are encouraged by the improvements in the bottom-line of the business and expect it to be profitable in 2010.

Would you please turn to slide eight? In the first quarter, our pigments division earned $29 million of adjusted EBITDA. This is the highest level of quarterly earnings since early 2006 and represents an increase of $45 million from the previous year. We have seen a strong recovery in global demand. Volumes improved 33% compared to the prior year and 11% compared to the fourth quarter. The supply-demand balance is tight right now for quality pigments as a result of improved global demand and the impact of structural, long-term and unplanned short-term supply reductions across the industry. Not surprisingly, industry inventory levels are at unusually low levels for this time of the year, so from a supply side, there does not appear to be much slack in the system.

Our stronger earnings are also in part a result of the restructuring efforts. This program includes the restructuring of our UK manufacturing footprint, the restart of our restructured Welba, Spain, plant, reduction of our already industry-leading SG&A costs, as well as driving greater revenue capture from our increasingly differentiated products and service offerings. We continue to see positive momentum on our sales, on our price increases announced earlier and expect further benefits to flow into the second quarter. We're pleased with the earnings trend and expect further improvement throughout 2010 as global economics improve. Before sharing some concluding thoughts, I would like to turn a few minutes over to Kimo Esplin, our Chief Financial Officer.

Thanks, Peter.

Let's turn to slide nine. We have shown a quarterly year-over-year sales volume chart for the last few quarters now. We think it's a good measure of underlying demand as it compensates for seasonal fluctuations. We've made adjusts to remove the effects of tolling, by-products on certain businesses that are no longer a part of our business portfolio. We've also added lines showing our actual pounds sold and our 2007 pounds sold by quarter which, is a good proxy for normalized demand. Our volumes for the first quarter increased 7%, compared to the first quarter of 2009, which was down 15% compared to the first quarter of 2008. By implication, doing the math, that suggests our volumes are down a net 8% relative to the first quarter of 2008. Adjusting for the effects of the planned maintenance at our Port Neches, Texas, facility, our first-quarter volumes improved 19%, compared to the prior year and 5% compared to the fourth quarter. We are encouraged by this trend and expect that it will continue in the second quarter. However, as you look at our actual pounds sold relatively to the 2007 pounds, we still have a gap to close of approximately 4%.

Slide ten. In the first quarter 2010, our adjusted EBITDA increased to $123 million from $57 million in the prior year. The primary reason for the year-over-year increase in adjusted EBITDA was a significant increase in volumes. We saw some positive benefits in margins as average selling prices increased more than direct costs, which are primarily our raw material costs. Of course, the production disruption at our Port Neches, Texas, facility, that Peter has discussed created a negative impact to $51 million in the first quarter of this year.

It's worth mentioning that starting this quarter, we reclassified the impact of LIFO inventory accounting, gains and losses into corporate and other and conformed prior period results to this presentation. This reclassification has no impact on fetal adjusted EBITDA. However, we believe it provides greater transparency to the underlying operating results of our Performance Products division. The year-over-year change in LIFO inventory valuation expense for the first quarter of 2010 reduced adjusted EBITDA by approximately $30 million and is captured in the column titled "Other" within this chart. Compared to the fourth quarter 2009, our first quarter 2010 adjusted EBITDA decreased by $50 million primarily as a result of the $51 million production disruption at our Port Neches, Texas, facility. We're encouraged by the sequential improvement in volume. Average selling prices increased more than direct cost, which include our raw material costs, expanding margins within the quarter.

We expect our long-term effective tax rate to be approximately 30 to 35%; however, for 2010, our adjusted income tax rate could be as high as 100%. This unusual tax rate caused by valuation allowances in countries like the UK and Switzerland, has no impact on cash taxes, which is expected to be approximately 20% over the next few years. Because of this, we believe earnings per share for 2010 will be volatile, less predictable, and less meaningful than adjusted EBITDA.

Turning to slide 11. Our year-over-year sales revenue the first quarter increased 25% as a result of improved recovery in global demand and higher average selling prices. Sales recovery continues to be most dramatic in the Asia-Pacific region, which represents 24% of our sales, with the year-over-year increase of 54% and other regions reporting solid improvements within the range of 14% to 21%. We saw double-digit increases in revenues across all of our segments as average-selling prices increased 12% in local currency terms and another 4% do you to the effects of foreign currency. On a quarter-over-quarter basis, all of our divisions saw an increase in sales revenue with the exception of polyurethane. Polyurethanes were negatively impacted by the production disruptions in Texas. The good news is that our average selling prices increased 10% in local currency terms, partially offset by 2% negative impact from currency as the US dollar strengthened against major European currencies.

Slide 12. During the first quarter of 2010, we saw the value of our primary working capitol components increase as a result of increased selling prices reflected in accounts receivable and finished inventory, as well as the absorption of higher raw material costs. As a result, we saw a use of cash of $57 million in the first quarter. The inventory chart on the right shows that although total inventory values increased 5% from the fourth quarter to the first quarter, we were able to maintain our tight discipline over underlying pounds, which actually decreased 1% over the same period. Beginning January 1, 2010, as a result, as a result of changes in accounting guidelines, outstanding borrowings related to our accounts receivable programs are accounted for on balance sheet, which has the effective increasing debt by $254 million. There is no cash impact from this change. The previous periods haven't been adjusted for our GAAP financial statements. Here in slide 12, we have adjusted prior periods to reflect these changes for purposes of calculating changes in working capital.

Slide 13. At the end of the quarter, we had approximately $1.1 billion of cash and approximately $400 million of unused borrowing capacity, summing to a total of 1.5 billion of liquidity on hand. This amount is more than adequate to provide operating flexibility and strategic growth for the Company. In connection with our ongoing insurance claim related to the April 29, 2006 Port Arthur, Texas, fire, we have received partial insurance proceeds today to $365 million. We remain in binding arbitration with the insurers, while we continue to respond to requests of the arbitration panel; based on preliminary rulings to date, the current maximum amount of any remaining recover 63 approximately $170 million. Any additional recoveries will be used to prepay secured debt.

We have been pretty active over the past several months, attending to our capital structure. In January, we repurchased all of our outstanding 7% convertible notes due 2018 for approximately $382 million. They notes were convertible into approximately 32.8 million shares; the repurchase of these notes resulted in a loss, an early extinguishment of debt of $146 million. We refinanced approximately $350 million of our senior sub-coordinated notes due 2013 and pushed the maturity date to 2020. With the cross currency swap, we executed simultaneous with the bond our effective Euro yield is 8.4% on the note. We also amended our existing bank credit facilities to, among other things, extend the maturity from 2010 to 2014 and reduce the revolving credit facility capacity from $650 million to $300 million. We currently have $225 million committed under the credit facility. We have no cash borrowings outstanding under this facility and expect to use it primarily to facilitate the issuance of letters of credit and bank guarantees. In addition, on April 26, we prepaid $164 million of outstanding term loans as a result of excess cash flow requirements under the credit agreement.

I will now turn the time back over to Peter for concluding remarks.

Thank you, Kimo.

In February on our last earnings call, I expressed concern about how much the US demand during the fourth quarter of 2009, the early part of the first quarter of 2010, was inventory restocking. Today, while I continue to believe that part of our demand increase over the past few months is inventory restocking, I also believe that the North American economy is stronger than I did in February. We continue to see robust demand in Asia and our growing Latin America markets, and we feel better about North America than we did in February. Europe, which represents approximately one-third of our revenues, continues to show tepid improvement, though I believe it's too early to quantify the impact of the Greek contagion effecting other European countries.

In short, demand should continue to improve in the second quarter. The improvement in demand will counterweight rising raw materials and logistics expenses. There is typically a delay of up to three months to collect on price increases after raw materials have spiked. We are also seeing an increase in freight costs and the potential closure or slowdown of the intercoastal waterway due to the Gulf Coast oil spill. As our first quarter adjusted EBITDA was impacted by $51 million of production disruption, I think our first quarter adjusted EBITDA without three production disruptions would be approximately $174 million. While demand should be stronger, raw materials and logistics should be a short term headwind. Despite these headwinds in the near term, we are pleased with the recovering demand that we are experiencing and in most of our global markets.

With that, I will turn that call back over to Kurt.

Thank you, Peter.

Let me remind everyone that we will be hosting an investor day on May 12 in New York City. The presenters will include Peter and Kimo as well as the presidents of each of our divisions. This event will provide a unique opportunity to learn more about our business and in an in-depth manner. We invite anyone interested in participating to e-mail us at IR at www.Huntsman.com to register for the event. For those unable to attend in person, the presentations will be webcast. A link to the webcast can be found on our website at www.huntsman.com within the investor relations section under presentations and webcasts. The presentations will begin at 8 AM that day, 8 AM Eastern.

Chanel, that concludes our prepared remarks. Would you explain the procedure for Q&A and then open the line for questions?

Will do. (Operator Instructions). Your first question comes from the line of Robert Koort of Goldman Sachs. Please proceed.

Thank you, good morning.

Good morning, Bob. Thank you for initiating coverage on us this morning.

You bet. Kimo, you gave a bridge on the year-over-year and quarter-to-quarter trends. I wonder if you can give us, in light of Peter's comments about the raw material and freight issues, what would that look like, do you suspect? First, the second quarter from a price versus cost standpoint and if you think about it over an annual basis, what would that look like?

Bob, you talking about raw materials?

That's right, trying to get a sense of the price cost dynamic as you go forward into the next quarter and into the second half of the year.

It's, as we look at it -- and the reason I was nebulous in my comments here, if you look at it in the month of April, crude oil looked to be push upwards of the high $80s, some were saying they would touching $90 by the end of the month. Now, of course, today, crude oil is down into the high $70s, having fallen off in the last couple of days; and we're seeing very, very volatile raw material prices across the board.

From the end of the month to the full impact that it's going to have in the second quarter, Bob, I hate to sound evasive on the answer, but from where prices were two weeks ago to today, that would be a factor of $10 of millions of added costs to the bottom line. If they continue in the trend of the last few days, it might be significantly less than that.

And, Peter, do your customers have enough sensitivity around the costs side that they would seek to defer orders if they thought your cost structure was starting to get better as ethylene, propylene and benzene start eroding again?

You will see that in some segments. There will be deflationary purchasing influences, I would call that.

For much of our formulated, our systems, specialty-oriented businesses and so forth, I don't think that is really a major issue because raw materials make up a small percentage of the overall costs here. When you do have some products where you have raw materials that make up 50%+ and you will have the majority of that being dominated by a single cost, you might see customers pushing off orders for 30 days or so.

As I look at the supply chain, again, I am speaking across all the businesses, as I am speaking, as I'm look at the supply chain, inventories on our customers are certainly higher than they were a quarter ago, but I would still say that in average, they're below normal.

Great. Thanks very much.

Any deferment. I don't see, would be a long-term deferment. It might be weeks or a month at the most. Thanks, Bob.

Thanks, Bob.

The next question is from the line of Laurence Alexander, Jefferies & Company.

Hi, this is Amanda Sigmund on for Lawrence this morning.

Hello, Amanda.

First, in the pigments business, what is your outlook for sequential demand trends and how should we think about the margins going forward in this business?

As we look at pigments -- again, most of our business is in Europe and as we have looked at demand in Europe and satisfying customers in North America and Asia as well, pigments on a longer-term bases is, is -- shouldn't, should be just around a GDP sort of a growing business at 2% to 3%.

When you look at the impact of the business over the last two years, you certainly have seen an absolute depletion of inventories on the customer side of that and you are seeing today a restocking of that inventory, but you're also seeing an increase in demand as we see an improvement in the production rate of automobiles and of housing. We continue to see a stronger sales demand coming back from Ti02.

We would expect that to continue. Quarter-on-quarter we saw about 11%, year-on-year, about 32%, so we'll continue to be pushing for price increases. I think, again, another interesting thing we should keep in mind as well as we look at inventories for pigments, today we're operating at 40, 45 days of inventories in industry; and that is down from the mid-50s where we were early in the year. Traditionally this time of the year, you're typically more in the 50s, the 60 days of inventory. There is pretty strong demand and structural changes taking place in that industry.

The only thing I would add is that seasonably, of course, in the Northern Hemisphere, the second and third quarters are the strongest volume quarters, so we would expect to see volumes move up from seasonal demand in the second quarter.

Okay.

Within the polyurethane business could you please update us on the supply-demand balance for MDI?

I think again on industry wide, Huntsman, like most of the industry, we have some of our smaller lines that are idled. I think the industry is operating today at close to the stated capacity. Certainly, they are in Asia and at higher rates in the US than they are in Europe.

You have about 800,000 tons that are out of the industry today, I am talking about right now. That isn't just two facilities around the world. For the most part, that is coming from a half a dozen to a dozen different producers and it is a variety of smaller to medium-sized lines, and so gradually, the capacity will come into the market as demand is able to absorb that. Again, when I take the stated capacity, I subtract out the 800,000 tons of announced closures and idled lines that transpired the last 18 months, the industry is probably running in the mid-90% today. That is MDI.

Thank you, a last one.

Do you have an outlook for a pension expense this year?

Yes. We expect pension expense to be around $75 million; our contributions are $50 million higher than that, similar to what we did in 2009.

Thank you.

Your next question comes from the line of Prashant Juvekar of Citi.

Good morning, this is [Eric Petre] standing in for P.J.

Hello.

Could you talk about the market acceptance of your recent product price increases within polyurethane, titanium dioxide, and Performance Products?

I think in all of those areas, we're seeing varying degrees of success. I emphasize the word of success. When I say varying degrees, that will be anywhere from offsetting higher raw material price as we're seeing in the Performance Products areas to price increases that are going to not only offset price increases of raw materials and but also go beyond that improving our contribution margin.

Your question, though very good, when I think about that segment-by-segment, they're really just are different dynamics in each of those three areas. The Performance Products for us is with everything from surfactants to amines to maleic and hydride. You look at some of the EO derivatives, the capacity is tight and getting tighter and prices will be going up, most likely, as that tightness will continue another quarter or so, at least. Ti02, as we stated earlier, the demand should be good seasonally, at least for the second and third quarter.

Some of the structural changes that have taken place, you have had over the course, the last 12 months, about 350,000 kilotons of capacity that have been permanently removed, about 7% to 8% of that entire industry industry where capacity has been removed. You also have some short-term operating disruptions in the industry that have tightened up titanium dioxide. Polyurethanes, again, demand continues to be very robust in Asia and not so much in Europe, and we're continuing to see growing demand in North America

The price increases will vary across the board, as I said in my comments. Some of those will come a month or two after the raw materials hit those and we believe that we'll be able to maintain, if not expand, our contribution margin.

Probably the most visible, at least in terms of large volume products we have, is Ti02. We announced effective April 1, $100 to $150 a ton price increase depending on the region you're talking about, and we're starting to see through the second quarter, varying degrees of success in that price increase.

Okay, perfect.

And my follow-up question is the $11 million negative impact in Performance Products due to the Port Neches plant shut down, has that been resolved as well?

Yes. Yes.

That was -- and we didn't have any damage to equipment as much as we lost the supply of natural gas going into the plant. That has been fully resolved and we're back up and running.

Okay, thank you.

Your next question comes from the line of Bill Young of Credit Suisse.

Good morning, gentlemen.

Good morning.

One thing I was worried about is the price competition, you mentioned some of that in MDI even though the effective operating rate is in the mid-90s and there was also some price competition in the epoxy area, I think you mentioned Windmill. This is not so consistent with the concept of "we're Performance Products and we get more pricing flexibility and it's not as competitive." Maybe you can explain the disparity or how I'm looking at it improperly.

Sure, we have described, Bill, for example, you mentioned epoxies. Absolutely. We describe our business as being roughly 80% formulation and component, specialty component driven. We have the 20% basic lick epoxy resin business that is absolutely commodity. When we talk about erosion, relative to epichlorohydrin and bisphenol a, our BLR, absolutely, we're seeing a commodity-type product. In our formulation and components businesses, those contribution margins have been very, very stable, price relative to raw materials.

Likewise, MDI is that way and you, but of course, have some PO/MTBE that has commodity-type pricing. You mention said our Performance Products. Our intermediate businesses do have some commodity components to it, but for the most part, we have structured those as cost-plus-type arrangements, which give it much more stable margins. The vast majority of our Performance Products business is our amines businesses, which are very stable in terms of contribution margin and also maleic and hydride that tends to be very stable as well.

How about MDI itself?

In terms of stability of contribution margins?

Yes, right.

Very stable. That business is effected by volumes. We talked about that over the past few quarters. 2009 because of auto, because of housing and insulation and commercial construction, really got impacted significantly by volumes. Contribution margin per unit has been stable there.

Okay. Great. Thanks.

Your next question comes from the line of Chris McCray of BlackRock.

Hi, good quarter guys and nice presentation.

I wanted to see if you could give us any guidance on the working capital side and inventory as we get through the year. Was the dip in the first quarter largely seasonal or can you highlight any factors that we should consider in our efforts to model cash flow for the year.

Really, it's going to be a function of where you see energy prices going. I think we have been able -- we have shown we can keep our volumes, our pounds in the tank at current levels. As demand increases globally, we may see that creep up a bit. I think we have it pretty well under control.

It's really as the raw materials rise, it's going to push the dollars up and be a function again of your view of crude for the year. If you assume that crude and natural gas are flat and the knock-on effect is our raw materials, butane, benzene, methanol are flat, you will see a fairly flat working capital line.

Okay. Thanks very much.

Sure.

Your next question comes from the line of [Danis Cantelope] of [Numaro].

Yes, hi and just a couple of questions, although a few of them have been answered. Just a little check on the Pigments division.

Obviously, you have seen some strong demand growth this particular quarter. I was trying to understand how exactly are you seeing the pricing, especially in your core market that is Europe and I would like to understand what are your views? How do you think the prices are going to be? Also, the raw materials, because I think in your presenting you motioned that the raw material cost is slightly going to go up? How do you see this particular division doing over the next quarter or so?

I think that as we look at the division, we talked about the strength we are seeing in demand. Kimo has talked about some price increases that we had. The weakening of the Euro will put some volatility in our Ti02 earnings, but by and large, if the Euro is weaker, you will see less imports coming in to the European market and you will see the European market being able to raise its prices on a Euro basis and you will see our costs both in pounds Sterling and in th Euro where we have most of our production of Ti02, our costs will be dropping; and we will actually, I believe, longer-term with the weaker Euro and weaker pounds Sterling, be able to produce at a more competitive costs, compared to North American and the Asian producers and we'll be able to export more.

So, you know, I think that by and large we have announced EUR150 per ton Euro price and we will probably have some of that offset assuming we're able to get the majority. We'll probably have some of that offset by some rising raw materials. I think the weakening Euro and weakening pound Sterling will have an impact on where we go in the future in this business.

Okay, so would it be advice (indiscernible) that the current level of EBITDA would be maintained or -- ?

I would always hope that we're able to increase the level of EBITDA. I think when we look at -- into the second quarter, I think we have an opportunity here to marginally improve on our EBITDA of our Ti02 business. Traditionally demand higher in the second quarter, and I think we have some price increases that are long, overdue and well-justified. I would hope that marginally, we would be able to exceed our first quarter earnings in the second quarter with our Ti02.

All right. Just a couple more questions.

I was wondering after all of the financial transactions you had done over the last three months, obviously, had to extend your maturity (indiscernible), you still have $1.1 billion of cash and I assume that one of your earlier calls, you did mention that you would be happy with $100 million of cash, given the current levels scenario. What is the number -- basically, my question is, do you see anymore debt repayments or bills or cash for any further acquisitions or anything coming up in the near-term or are you still far from it?

We stated we think appropriate liquidity, longer-term for this business is between $800 million and $1 billion. Clearly more liquidity at the end of the quarter than we would say we needed on a normalized basis.

We did say that post-March 31, we used $164 million to prepay term loans, so we used already some of that $1.1 billion to prepay some of our term loans, under an excess capital provision.

Okay.

We will continue to be looking at our capital structure, using excess liquidity to reduce debt and to continue to grow this business.

Okay, so in case -- so if I go back to earlier insurance point, you mentioned getting up to $170 million of cash and using for secured payments of loans. That would be over and above (indiscernible)?

That's right. On the insurance proceeds.

Yes.

And we need to be clear on the $175 million number. That is a theoretical number put in by the legal arguments that are put before the arbitration panel.

Okay.

That is the most we can get.

Right, right.

And have a counterpart that is arguing we don't owe anything. You're somewhere in between that. So, it's fair to say that the proceeds will go towards that reduction.

Right, and one last question, please.

Are we to expect any of the cash charges like the MTBE charge in this particular quarter, (indiscernible) the EBITDA the next quarter? Not just the same way? Is there any other (indiscernible) we should keep in mind, please?

We're not aware any of unplanned outages yet in the quarter, and we don't have any significant planned outages we're aware of.

Okay, so, we needn't come through any huge amount, any amount basically as a cash cost?

Right now, no.

Yes. Thank you so much. Yes.

Operator, thank you very much, we would like to thank everybody. I think that concludes, or we have gone through all the people in the lineup here.

We would like to thank everybody for joining us this morning. If there is -- we would look forward to seeing as many of you Wednesday for our investor day.

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.