No Red in Second-quarter Earnings

It's indeed better times for the U.S. chemical industry, thanks to an economic recovery that not only has taken hold but also seems to be broadening. Despite the pressures of wildly increasing raw material and energy costs, the industry is doing very well, reporting rising sales and largely double-digit increases in earnings for the second quarter.

The industry is benefiting from higher prices and increased demand for its products and from productivity gains from the cost-cutting measures and restructuring plans put in place over the past few years.

Raj L. Gupta, CEO at Rohm and Haas, said it well: "The positive impact of the higher demand, favorable currency movement, and modestly higher selling prices combined to offset the higher costs of raw material used in many of our businesses, driven by the high price of oil and natural gas, geopolitical uncertainties, and tight supply."

Earnings from operations, excluding unusual items, at Rohm and Haas rose 29.7% from the same period last year to $118.0 million on a 14.7% sales increase to $1.80 billion.

Only one of the 20 large and medium-sized firms surveyed by C&EN thus far had a decline in earnings in the second quarter. H.B. Fuller's earnings fell 4.9% to $11.7 million despite an 11.9% increase in sales to $363.1 million as the company was hit by higher raw material costs and selling price declines for its own products.

But double-digit increases prevailed. The biggest percentage increase in earnings among the group was at Arch Chemicals, where second-quarter earnings rose 97.0% to $26.2 million. Sales were up 30.7% to $402.8 million. Arch's earnings increase came primarily from its treatment products group, which includes products for water treatment, personal care, industrial biocides, wood protection, and industrial coatings.

FMC's earnings jumped 96.3% to $42.6 million on a 4.8% increase in sales to $534.3 million. CEO William G. Walter says the firm's agricultural chemicals business "not only continues to benefit from a healthy global farm economy but has also seen a significant expansion in operating margins driven by our focus to reduce costs."

W.R. Grace, despite being in bankruptcy, scored an 82.7% earnings rise to $24.3 million. Sales improved 13.7% to $572.4 million. "Each business segment contributed sales and profit increases, capitalizing on stronger economic activity worldwide and delivering on our strategic growth and productivity initiatives," CEO Paul J. Norris says.

Industry leader Dow Chemical marked another quarter of strong performance, reporting a 74.3% increase in earnings to $685.0 million. This was the largest dollar increase in earnings among the group--$292 million higher than in the comparable 2003 period. Sales of $9.84 billion were 19.4% higher than in the second quarter of 2003.

Dow notes that volume improved significantly, increasing in all operating segments except for hydrocarbons and energy, and across all geographic segments, with particularly strong growth in Asia-Pacific and Latin America. By contrast, number two DuPont's earnings rose just 19.3% to $805.0 million. In normal times, this would be a very respectable increase. DuPont's sales improved 2.1% to $7.53 billion.