Eastman Chemical Co progresses in improving profitability in a challenging economic environment

Eastman Chemical Company has announced it Q3-09 results. The company has continued to make solid progress improving profitability during a challenging economic environment. Jim Rogers, president and CEO said, “Cash generation also continues to be a priority, and we did a great job during the quarter generating well over US$200 million in free cash flow." Sales revenue in Q3-09 was US$1.3 bln compared with US$1.8 bln in Q3-08. Sales revenue for Q3-08 included contract ethylene sales resulting from Q4-06 divestiture of the polyethylene business. Also included in Q3-08 sales revenue were contract polymer intermediates sales resulting from the Q4-07 divestiture of PET polymers manufacturing facilities and related businesses in Mexico and Argentina. Excluding these items, sales revenue declined by 21% due to lower selling prices in response to lower raw material and energy costs and a decline in sales volume of 4%. Operating earnings in Q3-09 were US$191 mln compared with operating earnings of US$174 mln n Q3-08. Excluding accelerated depreciation costs and asset impairments and restructuring charges, net, operating earnings were US$179 mln in Q3-08. Operating earnings increased as lower raw material and energy costs and cost reduction actions were partially offset by lower selling prices and lower sales volume. The increased operating margin was attributed to a favorable shift in company product mix due to a higher percentage of overall sales revenue from the Fibers, CASPI, and Specialty Plastics segments compared to the PCI and Performance Polymers segments. Coatings, Adhesives, Specialty Polymers and Inks segment results in Q3-09 vs Q3-08. Sales revenue declined by 18% primarily due to lower selling prices and lower sales volume. The lower selling prices were in response to lower raw material and energy costs. The lower sales volume was due to reduced customer demand attributed to the global recession, particularly for products sold into the automotive, building and construction, and packaging markets. Operating earnings were $84 million in Q3-09 compared to US$55 mln in Q3-08. Operating earnings increased primarily due to lower raw material and energy costs and cost reduction actions, which more than offset lower selling prices and lower sales volume. Sales revenue declined by 40% and excluding contract ethylene sales resulting from the divestiture of the polyethylene business, declined by 30% due to lower selling prices. The lower selling prices were primarily due to lower raw material and energy costs. Operating earnings were US$33 mln in Q3-09 compared with US$65 mln in Q3-08 excluding asset impairments and restructuring charges and accelerated depreciation costs in third quarter 2008. The decline was due to lower selling prices partially offset by lower raw material and energy costs and cost reduction actions. Sales revenue declined by 36% for Performance Polymers, and excluding contract polymer intermediates sales to divested manufacturing facilities in Q2-08 declined by 27% due to lower selling prices while sales volume was unchanged. The lower selling prices were attributed to a decline in raw material and energy costs, particularly for paraxylene. Operating results were a loss of US$10 mln in Q3-09, compared with earnings of US$1 mln in Q3-08 excluding asset impairments and restructuring charges and accelerated depreciation costs. Operating results declined due to lower selling prices and the impact on sales revenue and manufacturing costs of continuing operational challenges with the IntegRex-based PET manufacturing facility partially offset by lower raw material and energy costs and cost reduction actions. Sales revenue of specialty plastics declined by 21% due to lower sales volume and lower selling prices. The decline in sales volume was attributed to the global recession which has weakened demand for plastic resins, including copolyester products sold into the consumer and durable goods markets, and for cellulosic plastics sold into various markets. Operating earnings increased to US$13 mln in Q3-09 from US$6 mln in Q3-08. The increase was due to lower raw material and energy costs and cost reduction actions partially offset by lower sales volume, lower capacity utilization resulting in higher unit costs, and an unfavorable shift in product mix with less cellulosic plastics sold into various markets. Commenting on the outlook for fourth quarter 2009, Rogers said: "We expect to continue to benefit from a favorable shift in company product mix and cost reduction actions we have taken. However, we also expect volatility in raw material and energy costs and a decline in sales volume due to normal seasonality to negatively impact our fourth quarter results."