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Business

Mixed Earnings In Fourth Quarter

Profits: Large chemical firms manage to make money despite some weak market segments

by Melody M. Bomgardner
February 4, 2013 | A version of this story appeared in Volume 91, Issue 5

In the fourth quarter of 2012, chemical firms reported sales and earnings that varied widely across sectors. The diverse results occurred against a backdrop of lingering slowness in the global economy. Overall, however, executives said that careful management of operations allowed their firms to stay profitable.

At DuPont, the contrast among sectors was stark. “We had double-digit earnings growth in agriculture and performance materials, but all these accomplishments were not enough to overcome the sharper than expected declines in demand for two of our product groups, specifically titanium dioxide and photovoltaic materials,” explained Ellen J. Kullman, DuPont’s CEO, in an earnings conference call.

DuPont recorded $110 million in earnings, a drop of more than 55% compared with the fourth quarter of 2011. Strong demand from Latin America for DuPont’s agricultural products made that segment a standout—with sales of $1.5 billion, up 18%. Adjusted earnings per share of 12 cents was 4 cents above consensus estimates.

Similar to DuPont, Dow saw sales in its agricultural sciences business soar 17% compared with the year-ago quarter. But overall flat volumes and weak pricing eroded sales by 1.3% for the quarter. The 26.7% increase in earnings was driven primarily by a $413 million decline in the costs of purchased feedstock and energy. Polysilicon woes, caused by an oversupply in the solar sector, also hurt Dow as it saw much lower returns from its equity share in polysilicon maker Dow Corning. Dow’s adjusted earnings per share of 33 cents for the quarter missed consensus expectations by a penny.

In a conference call with analysts, Dow CEO Andrew N. Liveris reflected on 2012. “It was a challenging year, but we controlled the controllable.” He singled out the company’s performance packaging business as having had a strong quarter and year, with sales increases in North America and Latin America.

The return of demand in North America had a larger, positive impact at PPG Industries. U.S. architectural coatings, automotive, and packaging markets led volume growth in performance and industrial coatings. As a result, PPG saw earnings of $238 million, an increase of more than 10% compared with the fourth quarter of 2011.

Celanese saw an even split in results for its four main business segments. Its advanced engineering materials had a strong sales and earnings quarter despite poor results in Europe and normal seasonality. Consumer specialties also posted increased earnings, while industrial specialties and acetyl intermediates segments posted lower sales and earnings. Overall, partly on the strength of new advanced-materials products, the firm raised earnings 17.4% despite 7.0% lower sales.

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