Huntsman shares plunge 31 percent after profit miss

NEW YORK Thu Aug 4, 2011 4:16pm EDT

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NEW YORK (Reuters) - Huntsman Corp (HUN.N) shares lost nearly a third of their value on Thursday after the chemical maker's second-quarter profit missed Wall Street's expectations because of higher supply costs.

The results confirmed what many chemical investors have feared for the past year: rising costs for crude oil and other feedstocks cannot be passed on to customers indefinitely.

Chief Executive Peter Huntsman, brother of U.S. presidential candidate Jon Huntsman, said the stock drop caught him off guard.

"Frankly, I'm very surprised," Huntsman told Reuters. "I think that we had one of the strongest quarters in the history of our business."

(For a graphic on Huntsman results, click on: r.reuters.com/myp92s.)

Huntsman's larger rivals Dow Chemical (DOW.N) and DuPont (DD.N) for the most part were able to pass higher costs to their customers given their scale, though analysts were skeptical that the trend will continue.

Huntsman's cost of goods sold rose 24 percent from a year earlier to $2.43 billion in the second quarter.

While the company was able to boost prices for titanium dioxide, a key paint pigment, and chemicals used to make pesticides and cosmetics, price increases eroded demand for Spandex and other textile products.

The company said results will turn around.

"This is going to be one of the strongest years, if not the best year, we've had in our history," Huntsman said.

Analysts lashed out at the company's results.

Huntsman's earnings missed expectations because of "multiple missteps," said Jefferies & Co analyst Laurence Alexander.

Jeff Zekauskas, a JPMorgan analyst, was bothered because the company reported results only 90 minutes before the conference call, leaving him little time to wade through unusually complex financial tables.

"It's very difficult to reconcile all of the income statement numbers to the data that you provide," Zekauskas told Huntsman executives on a conference call.

Huntsman said he thinks his company gives the right amount of information.

"We're certainly going to be looking internally as to any changes we would make," he said. "I think we give plenty of pages of financial information."

EARNINGS MISS

The company reported quarterly net income of $114 million, or 47 cents per share, unchanged from a year earlier.

Excluding restructuring costs and one-time items, the company earned 48 cents per share. By that measure, analysts expected 49 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 25 percent to $2.93 billion. Analysts expected $2.77 billion.

Part of the earnings miss was caused by foreign currency rates.

Huntsman operates two key businesses in Switzerland. The Swiss franc has risen against the U.S. dollar in the past year, and that dented Huntsman's results by nearly $20 million.

"I can't recall another quarter when we have been so adversely affected by currency fluctuations," Huntsman said.

WHITE HOUSE RACE

Jon Huntsman, former U.S. envoy to China and son of Huntsman Corp's founder, is a Republican presidential candidate. He is also a former company executive.

The presidential run has not affected the company, Peter Huntsman said. "I've not seen us pick up any business, or lose any business, because of his candidacy."

Huntsman could not remember if his brother's "Huntsman for President" sign was on his front lawn.

"To be honest with you, I haven't been home for the past couple of months. I've been traveling," he said. "If we don't have one up by now, I'm sure we will soon."

Huntsman shares closed down 31 percent at $12.50 on Thursday. The stock has traded between $8.47 and $21.52 in the past 52 weeks.

(Editing by Derek Caney, Matthew Lewis, John Wallace and Robert MacMillan)

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