Chemical Earnings Continue to Rise

Industry

The third quarter saw chemical companies generally continuing to build on past quarters, as earnings increased at most top firms surveyed by C&EN. But earnings growth among the companies was lower than it had been in previous reporting periods.

Nevertheless, a few companies still reported big gains. Nalco Holding's earnings rose 123.1% to $20.3 million; at Eastman Chemical, earnings increased 106.6% to $126 million; and Chemtura's earnings were up 110.9% to $40.7million.

Yet four companies saw earnings below where they were a year earlier. PolyOne's results fell 42.2% to just $6.7 million, Georgia Gulf declined 16.5% to $27.9 million, Engelhard was off 2.2% to $58.5 million, and PPG Industries slipped a slight 0.5% to $193million.

Most companies were in the middle, with respectable increases from year-earlier levels in both earnings and sales. Industry leader Dow Chemical had earnings growth of 29.8% in the quarter to $801 million as sales increased 11.8% to $11.3 billion. As in past quarters, Dow noted higher feedstock and energy prices. This time, though, they were exacerbated by the hurricanes, which raised costs even higher while causing the company to close plants and declare force majeure on some products.

Dow was not alone in being affected by the hurricanes. DuPont says business interruptions from Hurricanes Katrina and Rita lowered third-quarter sales by about $100 million and reduced pretax operating income by approximately $50 million. Earnings at DuPont were up 31.6% to $333 million on a modest 2.3% increase in sales to $5.87 billion.

Rohm and Haas estimates that shutdowns caused by the hurricanes cost it about $7.0 million after tax. But CEO Raj L. Gupta says, Despite the continued high raw material and energy-related costs, as well as some plant operational issues, which were compounded by the hurricanes and related logistical disruptions, Rohm and Haas delivered another strong quarter. The company's earnings rose 23.4% to $169 million on an 8.3% sales increase to $1.95 billion.

PPG also noted direct costs of $6.3 million associated with the hurricanes.

Of course, many, if not most, of the surveyed companies that did not break out costs also suffered from the hurricanes-if not from plant shutdowns, then in the form of the higher energy and feedstock costs the storms precipitated.