Peter Huntsman - President & CEO 
Thank you, Kurt. Good morning, everyone. Thank you for joining us. Let's turn to slide number 3. Adjusted EBITDA for our polyurethanes division in the third quarter 2014 was $187 million. During the quarter we experienced a manufacturing disruption at our Port Neches, Texas facility which negatively impacted EBITDA by approximately $30 million.
Demand for our MDI remains strong. Global sales volumes grew 5% compared to the prior year despite a weak European economy which led to flat sales in Europe.
Our Asia business continues to expand. Within China our sales volumes grew 7% in the third quarter, albeit at a slower pace than the second quarter. Asian growth was led by strong double-digit growth in our differentiated and consumer-driven automotive and furniture markets.
North America was the real highlight in the third quarter, with volume growth at 12%. Demand in our 2 largest North American markets were strong, with insulation growing at more than 20%, and composite wood products increasing 9%.
As a reminder, we have scheduled maintenance for the first quarter of 2015 at our PO/MTBE facility in Port Neches, Texas. We currently estimate that the facility will be offline for approximately 60 days, beginning around the 1st of February. The EBITDA impact will be approximately $60 million. This amount includes lost revenue and unabsorbed fixed costs for the period.
In addition the maintenance costs will be approximately $90 million. However, these costs are capitalized and amortized over approximately 5 years until the next scheduled maintenance outage, reducing future EBITDA over that future period of time.
The total cost of the maintenance will be approximately $150 million. We expect a typical seasonal slowdown in the fourth quarter as MDI demand slows and PO/MTBE prices soften.
Kimo Esplin - EVP & CFO
Thanks, Peter. Slide 8 – in the third quarter of 2014 compared to the prior year, our adjusted EBITDA decreased to $356 million from $376 million, as a result of our PO/MTBE manufacturing outage, which impacted EBITDA by approximately $30 million. Sales volumes decreased in large part due to the deselection of lower-margin business.
Average selling prices improved across the majority of our divisions, which more than offset higher raw material costs. Compared to the prior quarter, our EBITDA decreased $7 million. Our average selling prices improved, offsetting lower sales volumes.
Slide 9 – our year-over-year consolidated sales revenue for the third quarter increased 1%. This was primarily due to higher average selling prices of 3%, offset by a decrease in sales volumes of 3%.
From a regional perspective, US and Canada improved 12% and Asia Pacific improved 11%. Europe decreased 4% along with our rest of world category which is primarily comprised of Latin America, the Middle East and Africa, which decreased 7% as a result of our PO/MTBE manufacturing disruption.
Third-quarter revenue increased across the majority of our divisions compared to the prior year. Polyurethanes is our largest division. It made up 45% of our total revenue in the third quarter and grew 1%.
MDI urethanes revenue increased 8%, which more than offset the negative impact from the PO/MTBE manufacturing disruption.
P.J. Juvekar - Citigroup
Good morning. Peter, if you take a step back, your volume EBITDA really hasn't grown in 2 years. It peaked in 2012 and then it has been flat to slightly down each year. Can you talk about reasons behind that and why do you think EBITDA will turn around next year and begin to grow when we have all this capacity coming online in China?
Peter Huntsman - President & CEO
We do have capacity coming in China. We also see quite a bit of growth coming on in China, and the pricing that's coming on China. As I look at the opportunities around MDI urethane performance, we continue to do well in that particular business.
I continue to see growth in the earnings in MDI and MDI-related downstream businesses and so forth. So, I would continue to be quite optimistic about MDI and where it's going.
Kimo Esplin - EVP & CFO
P.J., if you go back all the way to 2009 – if you go back 6 years – each year consistently our urethanes, MDI urethanes business has improved. So, again, 2014 over 2013 by a significant amount. Roughly 10% year-to-date EBITDA improvement on the urethane side. So, 6 years of consistent improvement.
What we've had is some PO/MTBE noise. PO/MTBE, when you adjust for the outage, is pretty flat with last year.
James Sheehan - SunTrust Robinson Humphrey
Good morning. Thanks for taking my question.
Just wondering if you could give us your broader thoughts on oil prices, and the impact on some of your feedstocks like butane. Do you see the drop in oil prices as overall a positive or negative for Huntsman over the next year?
Peter Huntsman - President & CEO
For Huntsman, almost categorically across the board, assuming we don't see – I'm more concerned about severe volatility, both up and down, than necessarily higher or lower. But, by and large, we benefit by lower oil prices. As butane prices drop, benzene prices, all of our major raw materials related to the price of oil, we are going to see a fall-off in our raw materials.
As we see a fall-off in our raw materials, most of the products that we produce, as I look across the gambit – MDI, armines, our epoxies and so forth – most of the products we produce are operating in the high 80%s or the low 90% capacity utilization. So, with falling raw materials, you're going to be able to grab some of that additional margin. I would think that falling raw materials is something that, by and large, ought to be something that's positive for us, and certainly will help our working capital, as well.
James Sheehan - SunTrust Robinson Humphrey
Thanks. And could you also give us your sense of where MDI operating rates are today in each region of the world?
Peter Huntsman - President & CEO
I think that we're probably, region by region, I think that we'd probably be around 90%-ish when you look at the North American markets. I think that you're probably looking at, in the European market you're probably less than that. And Asia I think you're probably in the high 80%s, pushing 90%.
It's a tough one for us to get a handle on because so much of our MDI is not sold as MDI. We sell very little actual MDI. We're selling more and more downstream derivatives.
So, as we look at capacity utilization, we're looking at the utilization, the impact of that 2 or 3 steps further down the chain as we look at formulations and systems and so forth. Our objective is to see where capacity utilization has less impact on the business than perhaps it did in the last cycle.
But I would say globally I think the market is somewhere around 90%, give or take 1 or 2 points on either side. Regionally US has a bit of a tighter feel to it. Asia feels about that way and Europe is probably a bit sluggish in the high 80%s.
Frank Mitsch - Wells Fargo Securities, LLC
Terrific. And speaking on the polyurethane's business, when you were talking about it, you also mentioned that I think you had insulation, North American insulation up 20% and composite wood products up 9%. Obviously the housing data wouldn't suggest that level of jump. Can you expand upon that and how we should think about that playing out in the future, as well?
Peter Huntsman - President & CEO
Again, as I look at it among housing start-ups, I look at it around product substitution and so forth, as I look at our last quarters, I look at the orders thus far into the fourth quarter around MDI polyurethane's, and so forth, Frank, I'm not seeing anything that would tell me – yes, things aren't going through the roof in the fourth quarter but I'm not seeing any slowdown that wouldn't be typical of seasonality.
Kimo Esplin - EVP & CFO
If you look at the growth rates in insulation, remember, we have a large commercial business, but also we're seeing a lot of substitution on the residential side with spray foam that's substituting fiberglass. So, you may be seeing higher growth rates than underlying housing because of that substitution.
Frank Mitsch - Wells Fargo Securities, LLC
All right, that makes sense. Thanks so much.
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