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Earnings Weather Late-Winter Chill

First Quarter: Shrugging off weather impact, chemical executives see a strong 2014

by Melody M. Bomgardner
April 28, 2014 | A version of this story appeared in Volume 92, Issue 17

The Polar Vortex may be America’s most hated phrase so far this year, but the U.S. chemical industry overcame the extreme winter weather with first-quarter earnings that met or beat analyst expectations. Celanese, Cytec Industries, Dow Chemical, DuPont, and Praxair all boosted earnings compared with last year’s first quarter, thanks to diversity of both product line and geographic footprint.

Dow’s earnings shot up 17.7% to $964 million on almost flat sales but significant cost controls. The results, the sixth consecutive quarter of earnings growth for the company, were achieved despite the weather, CEO Andrew N. Liveris said. In a conference call with analysts, he reported higher sales of packaging plastics, improved fundamentals in the construction sector, and increased interest in new crop protection chemicals.

Bad weather in North America caused $100 million in higher feedstock and energy costs for Dow, but unseasonably warm weather in Europe boosted sales of agriculture products, Liveris pointed out.

A rebound in overseas construction markets contributed to an unusually strong quarter at Celanese, which raised earnings 39.0% to $196 million compared with first-quarter 2013. The firm said strong demand in Europe and Asia for emulsion polymers, used in paints and coatings, resulted in that business’s best performance in years. Celanese’s earnings per share of $1.33 beat expectations, according to Charles Neivert, a stock analyst at investment bank Cowen & Co.

Meanwhile, DuPont’s earnings per share of $1.58 missed earnings expectations by a penny, as the firm fended off high feedstock costs and a slow planting season, both weather related. Still, DuPont raised earnings for the quarter by 6.6% to almost $1.5 billion. The company reported higher earnings for electronic chemicals, enzymes, and safety products.

DuPont CEO Ellen J. Kullman said her firm is well positioned for future growth—and that growth may be on its way. The Chemical Activity Barometer, a leading economic indicator maintained by the American Chemistry Council, a trade group, reached 95.2 in April, its highest level since March 2008. “This suggests further growth momentum in the broader economy in the months ahead,” said T. Kevin Swift, ACC’s chief economist.

In Europe, however, growth is recovering slowly, according to the European Chemical Industry Council. Although chemical output was up 3% in January compared with the previous January, prices shrank 2.8%. Trends in capacity utilization and chemical employment were negative at the end of 2013, and confidence levels remained unchanged in March, the trade group reported.

Table shows chemical results for the first quarter of 2014.


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