Earnings Rise at Chemical Companies

A few U.S. chemical companies have reported on their third-quarter performances, and the results, while good, are not spectacular. For the eight companies that have reported, earnings improved at all but two: Engelhard and Fuller. The quarter was good news for W.R. Grace and Great Lakes Chemical, which emerged from losses in the same period last year.

In a sense, Grace showed the best overall performance for the group as it moved from a $9.9 million loss in third-quarter 2003 to $48.0 million in earnings this year. Sales at the company increased 11.3% to $579.9 million. And the company had an 8.3% profit margin, the highest of the eight firms.

"Sales and operating income from our Davison division were particularly strong," Grace CEO Paul J. Norris says, "reflecting increased demand for our higher performing products in Europe and North America and lower operating costs from more efficient manufacturing processes."

At Great Lakes, where results went from a $2.1 million loss last year to an $8.4 million gain on a 7.2% sales increase to $391.9 million, CEO Mark P. Bulriss credits polymer additives. "The supply/demand balances in the polymer additives business remain positive in many product areas, allowing for broad-based selling price increases," he says. "The continued progress shown by the polymer additives business helped overcome several challenges faced by our specialty products business during the quarter."

DuPont had, by far, the greatest earnings gain--an increase of 87.4% to $253.0 million--and the company's profit margin doubled from last year, but to just 4.4%. CEO Charles O. Holliday Jr. says, "For the third consecutive quarter, DuPont achieved strong growth in revenue, earnings, and cash despite the strong rise in energy and raw material costs."

John E. Roberts, chemical analyst at Buckingham Research Group, points out that "this is the first quarter in over a year where price gains outpaced raw material costs for DuPont."

PPG Industries achieved a 36.6% increase in earnings to $194.0 million on a 9.2% sales rise to $2.41 billion. The company's chemicals and coatings segments illustrated a difference in performance between upstream and downstream products that may become more widespread in the industry as producers of downstream products run into trouble passing along upstream cost increases.

Operating income from PPG's chemical unit increased 48.4% to $95.0 million on a 22.0% increase in sales to $532.0 million. The company achieved higher volumes, improved selling prices, and lower environmental and remediation costs that more than offset higher energy and raw material costs. But in coatings, the impact of cost increases and lower selling prices held back operating income. The unit showed only a 5.9% increase in operating income to $199.0 million on a 7.9% increase in sales to $1.32 billion.