Earnings Look Good So Far

SEVEN OF NINE chemical companies that have published their fourth-quarter 2006 financial figures show double-digit or better earnings increases, indicating that growth in the industry is not over. Earnings are from continuing operations, excluding significant extraordinary and nonrecurring items.

The largest percentage, as well as dollar, increase is at DuPont, where earnings rose 235% to $422 million on a 7.7% gain in sales to $6.23 billion. The rise in earnings, according to DuPont, reflects the increase in sales, flat fixed costs, and improved operating results in the company's performance materials and agriculture and nutrition businesses. Significantly, DuPont also was one of the chemical companies most affected by Hurricanes Katrina and Rita in the same year-ago quarter.

Cabot had a 146% earnings increase to $54.0 million on an 11.6% sales increase to $655 million. According to CEO Kennett F. Burnes, the company benefited from attention to manufacturing efficiency, cost minimization, and profitable growth in emerging markets. Also, for the first time in nearly two years, Cabot got relief from feedstock costs for its main product, carbon black.

Albemarle scored an 85.3% increase in earnings to $63.0 million, despite a slight sales decline of 0.6% to $585 million. "We delivered a terrific fourth quarter," CEO Mark C. Rohr says, "with strong underlying performance in each of our three business segments." Operating profit was up 81% for polymer additives, up 248% for fine chemicals, but down 4.5% for catalysts.

Air Products & Chemicals saw earnings rise 26.7% to $230 million on a 20.7% increase in sales to $2.43 billion. The company had double-digit or better sales growth in all of its segments except chemicals. According to CEO John P. Jones III, "We delivered substantial top-line growth with strong volumes, improved pricing, and higher equipment results. We also drove productivity to the bottom line, resulting in significantly expanded [profit] margins and increased return on capital."

Praxair, the other industrial gas company on the list, had a 25.7% jump in earnings to $269 million. Sales were up just 5.1% to $2.12 billion. CEO Stephen F. Angel says: "We leveraged solid underlying sales growth in all our core geographies into record earnings due to our intensive focus on pricing, productivity improvements, capital discipline, and excellent project execution."

Industry leader Dow Chemical was the only company to report a decline in earnings, which were down 3.9% to $954 million. Sales rose 2.7% to $12.2 billion.

The company notes that sales volumes were up 2% in the quarter as solid growth in performance plastics, performance chemicals, and basic plastics more than offset declines in basic chemicals and hydrocarbons and energy. Prices edged up 1%. According to Dow, after 17 consecutive quarters of year-over-year increases, feedstock and energy costs declined in the fourth quarter, down 6% from the same period in 2005.