Sales revenue up at Eastman's Fibers segment

23 Apr '10

5 min read

Performance Chemicals and Intermediates – Sales revenue increased by 58 percent due to higher sales volume, higher selling prices and a favorable shift in product mix. The higher sales volume was due to improved customer demand compared to the depressed levels in first quarter 2009. The higher selling prices were primarily in olefin-based product lines in response to higher raw material and energy costs. The favorable shift in product mix was due to increased sales volume in higher priced olefin derivative product lines and sales revenue from the acetyl license. Operating earnings in first quarter 2010 increased to $37 million compared with an operating loss of $4 million excluding restructuring charges in first quarter 2009. The increase was due to higher selling prices, higher sales volume and higher capacity utilization which led to lower unit costs, and the favorable shift in product mix including sales revenue from the acetyl license. Operating earnings were negatively impacted by higher raw material and energy costs and approximately $12 million by the outage at the company's Texas manufacturing facility.

Performance Polymers – Sales revenue increased by 22 percent due to higher selling prices and higher sales volume. The higher selling prices were primarily due to higher raw material and energy costs, particularly for paraxylene. Sales volume increased due to improved operations of the IntegRex™-based PET facility. Operating results were a loss of $13 million in first quarter 2010 compared with a loss excluding restructuring charges of $14 million in first quarter 2009 as higher selling prices and the favorable impact of improved IntegRex™ operations were mostly offset by higher raw material and energy costs. First-quarter 2010 results were negatively impacted by continued difficult market conditions for PET in North America.

Cash Flow
Eastman used $225 million in cash from operating activities during first quarter 2010. Excluding the $200 million impact of the adoption of amended accounting guidance, Eastman used $25 million in cash from operating activities primarily due to increased accounts receivable from increased sales. In first quarter 2010, Eastman adopted amended accounting guidance for the transfers of financial assets which changed the financial statement presentation of activity under the company's accounts receivable securitization program. As a result, $200 million of receivables, previously accounted for as sold and removed from the balance sheet when transferred under the accounts receivable securitization program, are included on the first-quarter balance sheet as trade receivables, net. This increase in receivables reduced cash from operations by $200 million in first quarter 2010. Excluding the impact of the adoption of this amended accounting guidance, the company expects to generate free cash flow between $200 million and $300 million for full year 2010. Free cash flow is defined as cash from operating activities minus capital expenditures and dividends.

Eastman Chemical Company

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