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Eastman delivers solid Q3 earnings despite energy cost volatility

24
Oct '08
Eastman Chemical Company announced earnings from continuing operations of $1.33 per diluted share for third quarter 2008 versus $0.30 per diluted share for third quarter 2007. Excluding the items described in the following paragraph, third-quarter 2008 earnings from continuing operations were $1.35 per diluted share, while third-quarter 2007 earnings from continuing operations were $1.27 per diluted share.

Included in the results for third quarter 2008 were accelerated depreciation costs of $3 million and asset impairments and restructuring charges of $2 million. Third-quarter 2007 results included accelerated depreciation costs of $9 million and asset impairments and restructuring charges of $114 million primarily related to the divestiture of the company's PET polymers facilities in Mexico and Argentina.

"We delivered solid third-quarter earnings despite significant raw material and energy cost volatility, uncertain prospects for the global economy, and difficulty in the financial markets," said Brian Ferguson, chairman and CEO. “We continue to benefit from the diversity of our portfolio of businesses and the actions we have taken over the last five years to improve our profitability and strengthen our financial position.”

Sales revenue for third quarter 2008 was $1.8 billion, an 8 percent increase compared with third quarter 2007. Sales revenue for both third quarter 2008 and third quarter 2007 included contract ethylene sales resulting from the fourth-quarter 2006 divestiture of the polyethylene business.

Also included in third-quarter 2008 sales revenue were contract polymer intermediates sales resulting from the fourth-quarter 2007 divestiture of PET polymers manufacturing facilities and related businesses in Mexico and Argentina. Third-quarter 2007 sales revenue included sales from the divested Mexico and Argentina PET manufacturing facilities. Excluding these sales for both periods, sales revenue increased by 12 percent as higher selling prices in response to higher raw material and energy costs more than offset a 3 percent decline in sales volume.

Operating earnings in third quarter 2008 were $174 million compared with operating earnings of $46 million in third quarter 2007. Excluding accelerated depreciation costs and asset impairments and restructuring charges from both periods, operating earnings were $179 million in third quarter 2008 compared with $169 million in third quarter 2007. The company's third-quarter 2008 raw material and energy costs increased by approximately $225 million compared with third quarter 2007.

Segment Results 3Q 2008 versus 3Q 2007

Fibers – Sales revenue increased by 4 percent primarily due to higher selling prices in response to higher raw material and energy costs, particularly for wood pulp and methanol. Operating earnings were $65 million in third quarter 2008 and $66 million in third quarter 2007.

Performance Chemicals and Intermediates – Sales revenue increased by 17 percent as higher selling prices more than offset lower sales volume. Both selling prices and sales volume were significantly impacted by contract ethylene sales resulting from the divestiture of the polyethylene business in fourth quarter 2006. Excluding the contract ethylene sales, PCI's sales revenue increased by 19 percent due to higher selling prices in response to higher raw material and energy costs, which more than offset a 2 percent decline in sales volume. Operating earnings, excluding accelerated depreciation costs and asset impairments and restructuring gains and charges in both periods, were $65 million in third quarter 2008 and $51 million in third quarter 2007, as higher selling prices more than offset higher raw material and energy costs.


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