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Economy

More chemical companies post slumping earnings

Firms post sharp declines during the COVID-19-impacted quarter

by Alexander H. Tullo
August 5, 2020

Second-quarter 2020 chemical earnings
COVID-19 pushed chemical results down nearly across the board.
Source: C&EN tabulations based on company documents.
Note: Dow, Covestro, and Huntsman suffered losses of $217 million, $60 million, and $30 million, respectively.
20200805lnp1-earnings.jpg

More chemical companies have announced results for the second quarter, the period in North America and Europe that has been most impacted by the lockdowns due to the COVID-19 pandemic. And though sales and profits are down, this latest batch of companies—Chemours, LyondellBasell, Eastman Chemical, DSM, and Evonik—managed to avoid losses for the quarter.

The economic downturn has been the worst since the great depression. Nearly all chemical companies have suffered sharp declines in sales and profits, particularly those exposed to automotive and aerospace sectors. Earlier-reporting companies including Dow, Huntsman, and Covestro, posted losses for the quarter.

Chemours’ profits declined by 75%. Its fluoropolymers business saw a drop in sales because of the standstill in the automotive industry.

A bright spot for the company has been brisk sales of the white pigment titanium dioxide for architectural paints because people in quarantine have been undertaking do-it-yourself projects at home.

Unrelated to COVID-19, Mark Vergnano told analysts that the company’s lawsuit against DuPont in the Delaware Court of Chancery over inherited liabilities related to perfluoroalkyl substances (PFAS) is likely headed for a settlement. The cleanup bill at sites in New Jersey and elsewhere could reach hundreds of millions of dollars. Chemours has alleged that it was unfairly saddled with the liabilities when it was spun off from DuPont in 2015.

“As I’ve always said, whether we go through arbitration or whether we go through litigation, the end point is probably going to be a settlement between the two companies,” Vergnano said. “We continue to talk.”

During the quarter, LyondellBasell experienced a 78% drop in profits on a 39% decline in sales. Bob Patel, the company’s CEO, pointed to bright spots. “Our olefins & polyolefins businesses continued to benefit from strong demand for polymers used in consumer-driven packaging and healthcare applications,” he said in a statement. While there was modest increase in polyethylene sales, lower ethylene prices and volumes drove operating income down in that business unit from $504 million a year ago to $107 million in the second quarter.

For the quarter, Eastman reported a decline in sales of 19% and a drop in earnings of 58%. However, CEO Mark Costa was pleased with a “relatively solid” first half of the year, due, he said, to the company’s diversified portfolio.

Evonik’s CEO, Christian Kullmann, was also pleased with his company’s results of a merely 15% drop in sales and a 30% decline in earnings for the quarter. “Evonik is weathering the crisis,” he said in a statement.

DSM managed to get through the quarter with only a 2% drop in sales. Though the company’s materials business saw a 25% decline in sales over the period, its nutrition business actually saw a 9% increase.

“Barring a large second wave of virus, we believe the global economy bottomed in mid-May. Since then, order patterns have begun to stabilize with improvement each week in June and into July,” Chemours’ Mark Vergnano told analysts.

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