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Investing.com -- Huntsman (NYSE:HUN) Corp. and its subsidiary, Huntsman International LLC, have seen their issuer credit ratings downgraded from ’BBB-’ to ’BB+’ by S&P Global Ratings. This decision was made due to the forecast that Huntsman Corp.’s 2025 EBITDA margins and credit measures will remain weaker than the expectations for an investment-grade rating. This marks the third consecutive year of underperformance for the company.
Huntsman International’s unsecured debt issue-level rating was also lowered to ’BB+’ from ’BBB-’, with a recovery rating of ’3’. This downgrade follows a reassessment of Huntsman’s business risk profile due to a sustained drop in EBITDA margins.
Since 2023, various factors have led to a significant decrease in revenues and EBITDA from their 2021-2022 peaks. These include persistent inflation, subdued demand from the key housing and construction markets, slower demand from automotive, customer destocking, depressed profitability in certain key products, and a more competitive operating environment in key regions such as China.
S&P Global Ratings expects continued soft EBITDA and EBITDA margins in 2025 due to housing market challenges and macroeconomic uncertainty. Despite these challenges, the company’s liquidity position and appropriate financial policies are expected to support the rating.
In 2026, a moderately higher EBITDA is expected, along with prudent financial policies. The company is expected to maintain a weighted-average S&P Global Ratings-adjusted funds from operations (FFO) to debt in the upper end of the 20%-30% range.
S&P Global Ratings believes that Huntsman will maintain stronger credit metrics than a company with a similar financial risk profile, such as Avient Corp. This is due to Huntsman’s ability to preserve cash flow if earnings continue to underperform by scaling back on capital expenditure and making minimal share repurchases or mergers and acquisitions.
The stable outlook on Huntsman reflects the belief that, while EBITDA and EBITDA margins will likely remain under pressure through 2025-2026, the company’s liquidity position and financial policies support the rating.
Huntsman’s financial policies, indicated by a net debt to EBITDA target of 2x on average through the cycle, support maintaining credit quality. The company used some of the proceeds from the $2 billion sale of its Intermediates business to reduce balance sheet debt and bolster its cash position.
S&P Global Ratings could consider lowering their rating on Huntsman within the next year if EBITDA remains near troughs and there is no meaningful improvement in 2026. Conversely, a positive rating action could be considered if there is a positive ruling as it pertains to antidumping of MDI in the U.S., or if demand and pricing for Huntsman’s products exceed base-case assumptions.
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