Chemical companies and industry groups continue their drumbeat of bad news about the quarter they are about to complete and the rest of 2022. A common theme: difficult business conditions in Europe.
Chemours is one of the latest firms to issue a warning, saying Sept. 21 that earnings before taxes for the third quarter would be about 7% below its earlier guidance for stock analysts. In a press release, CEO Mark Newman blamed the firm’s titanium dioxide pigment business, where “we have experienced a continued decline in our demand outlook throughout the third quarter, most notably in Europe and Asia.”
On Sept. 20, chlor-alkali maker Olin issued its second earnings downgrade of the quarter. “We have seen global economic conditions worsen faster than expected with an accelerated deterioration in both European and North American demand, particularly in epoxy and vinyls intermediates,” CEO Scott Sutton said in announcing the tempered outlook.
Huntsman said Sept. 16 that it expects third-quarter earnings before taxes to land between $260 million and $280 million, far from previous guidance of $310 million–$355 million. “Huntsman is feeling the same pressures as others in the industry as we are being impacted by persistent and extraordinary cost of energy in Europe, together with lower than expected demand across segments in our portfolio,” CEO Peter Huntsman said in a statement.
Eastman Chemical was one of the first companies to warn analysts that its third quarter would miss expectations, reporting Sept. 13 that earnings would come in 19% below its earlier forecast. A day later, Dow’s chief financial officer, Howard Ungerleider, told a Credit Suisse conference that Dow’s third-quarter earnings before taxes would be about $600 million below what stock analysts were expecting.
Like other executives, Ungerleider pointed to lower demand and higher energy costs in Europe as key reasons for the reduced outlook. Although no major German chemical company has formally cut its outlook yet, a recent report from VCI, Germany’s main chemical industry association, is grim in its predictions. It warns that business consequences of the war in Ukraine—high energy and raw material costs, persistent supply bottlenecks, and possible natural gas rationing—could bring production cutbacks and even a recession.
The group says that production capacity utilization in the German chemical industry is 81.4% below normal and that output is likely to fall by 8.5% in 2022.
“The immense challenges are a serious danger to the competitiveness of our companies and thus also to the future of Germany as an industrial location,” VCI president Christian Kullmann writes in the report. “Cutting back production is a first step. If certain processes have to be shut down altogether, they may never start up again.”