26 April 2002 00:28 [Source: ICIS news]
HOUSTON (CNI)--Chemicals, fibres and plastics manufacturer Eastman reported Thursday an 84% drop in first quarter net earnings to $6m (Euro6.7m) on an 8% decline in sales at $1.24bn with the company citing lower product prices, product mix and currency exchange effects.
Kingsport, Tennessee-based Eastman also reported a 20% decline in its operating earnings for the quarter ended 31 March, falling to $77m from the $96m reported for first quarter operating earnings in 2001.
But the company noted that its performance improved over the fourth quarter 2001, in which it reported a loss of $92m.
Said Brian Ferguson, chairman and chief executive: "After a very tough fourth quarter, we feel encouraged about our performance so far this year. Cost control and lower raw material costs contributed to higher earnings from operations for first quarter compared with fourth quarter of last year."
The company said it had earnings/share (eps) of 7 cent for the first quarter this year, including the effects of a change in accounting principles and a non-recurring charge. Excluding those items, eps was stated at 35 cent, a decline of 35% from the first quarter 2001 eps of 54 cent.
Eastman noted too that its sales volume was up 8% for this year's first quarter, due chiefly to the businesses acquired from Hercules in the second quarter 2001.
In the company's Eastman Division, operating earnings for the quarter were reported at $23m. The company said that "margins declined as a result of selling price declines, the negative effect of exchange and product mix, and lower foreign currency hedging gains, offset by lower raw material costs and lower amortisation."
However, the division saw earnings from operations up by $10m compared with fourth quarter last year. Ferguson said of the division: "Our ongoing efforts to improve gross margins through consolidation within our coatings, adhesives, specialty polymers and inks segment plus our continuing work to drive down costs company-wide contributed to the improvement in earnings from fourth quarter."
In the company's Voridian division, operating earnings for the just ended quarter were $52m, essentially flat with first quarter 2001 operating earnings, the company reported. A decline in earnings in the polymers segment was offset by an increase in fibres earnings.
Voridian earnings were up by $40m compared with the fourth quarter, Eastman noted, crediting margin improvement in polymers for both polyethylene terephthalate (PET) and polyethylene (PE). Said Ferguson: "Lower raw material costs and higher capacity utilisation for PET polymers, lower raw material costs for PE and steady business in the fibres segment all contributed to the earnings improvement."
Looking forward, Ferguson said: "We still have not seen the demand improvements that would lead us to believe the economy has turned around; therefore, we only expect to see seasonal demand improvement in the second quarter."
"Our expectation is that costs for key raw materials will increase in the second quarter compared to first quarter 2002," Ferguson added. "We continue with our efforts to preserve margins across the company through a combination of higher selling prices and cost control. On balance, we expect second quarter earnings per share to be similar to first quarter 2002 earnings per share excluding nonrecurring items."
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