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Finance

Chemical companies see auspicious start to 2018

Sales and earnings grow strongly for most firms, and the outlook is positive for the rest of the year

by Alexander H. Tullo
May 3, 2018 | APPEARED IN VOLUME 96, ISSUE 19

U.S. chemical companies enjoyed a barn burner of a quarter to begin the year. Earnings increased by double digits for nearly all the 10 major companies to report quarterly results so far. Sales also increased for almost all firms.

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First-quarter results
Most chemical makers saw an enormous jump in earnings. nm = not meaningful because of prior-year losses.
Note: DowDuPont results for 2017 are pro forma.

“We’re off to a compelling start to the year,” Mark Costa, CEO of Eastman Chemical, told analysts in a conference call. His company posted a 20% increase in earnings on a 13% climb in sales versus the year-ago period.

Costa credited what he calls Eastman’s “innovation-driven growth model,” which is focused on new products. He cited his company’s Naia cellulosic yarn, which he said is gaining traction with Asian garment makers looking for environmentally friendly fibers. Another example is Aerafin polyolefin resin. Costa told analysts that he expects shipments to double for the material, used in packaging, this year.

In its second quarter since being formed through the merger of Dow Chemical and DuPont, DowDuPont posted increases in sales and earnings that—at single digits—were more modest than those from the rest of the chemical pack. The company’s materials and specialty products business made up for a cold snap that slowed agricultural shipments.

However, during the quarter, DowDuPont made progress on its long-term project of shedding costs to prepare for splitting into three separate companies next year. The firm cut $300 million in costs during the quarter and is on track to cut $1.2 billion in costs this year. Overall, it is aiming for $3.3 billion in cost savings by the end of next year.

DowDuPont also seeks to generate about $1 billion in additional earnings by cultivating synergies between former Dow and DuPont businesses that overlapped in agriculture, packaging, and electronic materials.

“Our businesses are performing well,” DowDuPont CEO Ed Breen told analysts. “We’re executing against our financial and operational commitments. And we’re pleased with the team’s progress as we move toward the intended separations.”

FMC’s sales doubled and its earnings quadrupled year over year. The company chalked this up to successful integration of the chunk of DuPont’s crop protection business that it purchased last year. In addition, the company got a lift from a lithium hydroxide expansion in China and a 30% rise in lithium hydroxide prices.

Ashland’s quarterly earnings increased 56%, a result that “exceeded our expectations,” CEO William A. Wulfsohn told analysts. The improvement was largely a result of brisk sales of specialty ingredients, notably in Ashland’s excipients business, which experienced 17% growth year over year.

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