Volume 95 Issue 6 | p. 11 | News of The Week
Issue Date: February 6, 2017

Chemical firms succeed with specialties

Fourth-quarter results show importance of demand for consumer products
Department: Business
Keywords: finance, consumer products, Trump Administration, economy

Earnings reports from U.S. chemical firms show they ended 2016 relatively unscathed by an uneven and challenging global business environment. Notably, demand for consumer-oriented specialties buoyed results in the fourth quarter.

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Fourth-quarter results

Industry ends year on strong note despite lower prices. nm = not meaningful
Source: companies
This image shows the percentage increase in earnings and sales at chemical firms in the fourth quarter of 2016 compared to last year.
 

Fourth-quarter results

Industry ends year on strong note despite lower prices. nm = not meaningful
Source: companies

But the slow upswing in demand came amid cost-cutting, restructuring, acquisitions and divestments, and negative currency impacts due to the strong dollar. Those factors produced the mixed financial results posted by Dow Chemical, DuPont, and other early-reporting firms.

For example, Dow’s fourth-quarter sales soared by almost 14% to $13 billion compared to last year’s fourth-quarter, primarily due to the addition of Dow Corning’s silicones business.

In contrast, DuPont changed the timing of new seed rollouts, resulting in a 2% decrease in overall sales. It reported volume growth at other major businesses including performance materials and industrial biosciences.

Both firms saw big earnings increases for the quarter. Dow’s $1.1 billion in profits beat analyst expectations, and DuPont came back from a big loss last year to earn $263 million in the fourth quarter.

Eastman Chemical, Praxair, and Ashland reported strong demand for consumer-related specialty chemicals, but earnings were lower than last year, as sales at other businesses lagged.

Chemical executives said they expect continued earnings growth in 2017 of as much as 9–12%, not including currency impacts. But Dow CEO Andrew N. Liveris and Air Products CEO Seifi Ghasemi voiced differing views about how political changes in the U.S. and Europe may affect their industry’s fortunes.

In a conference call with analysts, Liveris praised the Trump Administration, which he said “really has articulated a focus on structural reforms in several areas, including competitive taxes, smart regulation, and fair trade rules.” The President has tapped Liveris to head an effort to turn around U.S. manufacturing.

But Ghasemi, in a report to investors, wrote, “The new Administration in the U.S. has not yet articulated its full economic and foreign policy.” He also sounded a note of caution about the U.K.’s exit from the European Union and said the two factors make the firm “more cautious in our outlook.”

 
Chemical & Engineering News
ISSN 0009-2347
Copyright © American Chemical Society

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