Eastman Chemical discusses 2Q results, sales drop for specialty plastics
Eastman Chemical Co. announced earnings from continuing operations of $1.40 per diluted share for second quarter 2012 versus $1.44 per diluted share from a year ago.
Reported earnings excluded $33 million in financing, transaction and integration costs related to the acquisition of Missouri-based chemical company Solutia Inc. and a $15 million gain in second quarter 2011 from the sale of a previously impaired asset.
Solutia, which supplies specialty films and additives for the automotive, building and construction and renewable energy markets, is expected to broaden Eastman’s geographic reach into emerging economies and expand its sustainable product offerings.
Revenues dipped 2% to $1.85 billion from $1.88 billion the year before. While Eastman’s performance chemicals and coating segments were just about unchanged, its specialty plastics division declined by 6% compared to 2011.
The decrease in sales volume, mainly in the U.S. and Europe, was attributed to weakened demand for copolyester product lines primarily in the consumer and durable goods markets.
However, Eastman chairman of the board and CEO James Rogers, said the company expects the specialty plastics business to have a solid year.
When specifically asked about this division, Rogers told analysts, “The place I see that got hit was really the durables. When the economy’s tough, people just aren’t out buying new blenders and new durable goods.”
Since its introduction in 2007, Tritan has been touted as a “drop-in” replacement for polycarbonate (PC) in products, and has attempted to claim some of the market share PC has lost due to safety concerns about its chemical forerunner, bisphenol A (BPA).
Eastman describes Tritan as a “new-generation copolyester that provides a balance of desirable properties, including clarity, toughness and dishwasher durability, and is BPA-free.”
Tritan is also marketed as estrogenic activity (EA) free and is used in more than 600 products ranging from serving and storing items to reusable sports bottles, baby bottles and small appliances.
“Tritan, when you think about the markets it’s going into, it’s fighting the same kind of durable goods battle right now, so that was flat,” Rogers said. “I can see the value proposition. I know we’ve got a good product. I know we’ll take share from some of the competing materials.”
In 2010, Eastman opened a plant dedicated to the production of the Tritan copolyester at its headquarters in Kingsport, TN. In an article on PlasticsToday, it was reported, including the original developmental line, “Eastman had just over 30,000 tonnes/yr of capacity for Tritan copolyester, all in Kingsport, with plans in place to double that by 2011 to 60,000 tonnes/yr should demand continue to expand at its current pace.”
Eastman and Tritan made headlines earlier this year when the company filed a civil action lawsuit against PlastiPure and CertiChem claiming the companies made false or misleading statements regarding EA coming from Eastman’s Tritan line.
Later in the call, Rogers was asked about an update regarding “Tritan 2.”
“It’s probably going to take us a little longer to fill out that second line than maybe we first thought,” he said. “It’s not, frankly, hardly anything to do with Tritan, everything to do with the economy and the durables goods markets, like I was mentioning before. But I’d say that’s fantastic product; we will fill the line out. It is going to take share from the other materials, it’s just going to take us a little bit longer.”
Moving ahead, Eastman continues to expect double-digit earnings growth in 2012, which will be boosted by the Solutia acquisition, according to Zacks, an investment research firm.
“The thing I might add is that some of the businesses are more economically sensitive than others,” said Curtis E. Espeland, Senior Vice President and CFO for Eastman. “The great thing about that, we’ve made the investment. We have the capacity so when those end markets come back, this business is well positioned to improve its performance.”