Eastman delivers solid Q3 earnings despite energy cost volatility

24 Oct '08

5 min read

Performance Polymers – Sales revenue decreased by 14 percent primarily due to the divestiture of the PET polymers manufacturing facilities and related businesses in Mexico and Argentina in fourth quarter 2007. Excluding third-quarter 2008 contract polymer intermediates sales to divested manufacturing facilities and third-quarter 2007 sales from the divested Mexico and Argentina PET manufacturing facilities, sales revenue from U.S. PET manufacturing sites increased by 4 percent as 17 percent higher selling prices in response to higher raw material and energy costs, particularly for paraxylene and ethylene glycol, were partially offset by a 12 percent decline in sales volume. The decline in sales volume was due to the shutdown of higher cost PET assets in the first half of 2008 and was also attributed to weaker demand for bottled carbonated soft drinks and lighter-weight water bottles. Excluding accelerated depreciation costs and asset impairments and restructuring charges for both periods, operating results for U.S. PET manufacturing sites improved to operating earnings of $1 million in third quarter 2008 compared to a loss of $3 million in third quarter 2007. The improvement was due primarily to higher selling prices and actions to improve results at the company's South Carolina PET facility, including the new PET facility based on IntegRex™ technology, partially offset by higher raw material and energy costs and the impact of lower sales volume.

Specialty Plastics – Sales revenue increased by 17 percent primarily due to a 8 percent increase in sales volume, particularly in Asia Pacific and North America, and higher selling prices in response to higher raw material and energy costs. Sales volume increased primarily due to growth in copolyester products in packaging, consumer and durable goods and cellulose esters used in liquid crystal display (“LCD”) screens. Third-quarter 2008 operating earnings were $6 million and $13 million in third quarter 2007 as higher raw material and energy costs, particularly for paraxylene and ethylene glycol, more than offset higher selling prices and the impact of increased sales volume.

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Outlook : Commenting on the outlook for fourth quarter 2008, Ferguson said: “We continue to benefit from our global geographic profile, diverse product portfolio and solid financial position. We also continue to confront economic weakness in North America and Europe, slowing demand growth in Asia, and volatile raw material and energy costs.Given our current expectations for weak economic growth through the end of the year, we expect fourth-quarter 2008 earnings per share from continuing operations excluding gains and charges related to strategic actions to be near the low end of the current range of analysts' estimates on First Call, which is $0.90 per share.”

Eastman Chemical Company

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