07 November 2005 00:01 [Source: ICB Americas]
COMMODITY CHEMICAL firms are posting profit gains in the third-quarter despite the impact of the hurricanes as stronger product pricing offset higher raw material costs. Huntsman and Westlake both beat Wall Street profit forecasts.
Huntsman Corp.’s adjusted third-quarter profits gained 5 percent to $80.6 million as sales climbed 6 percent to $3.12 billion. Earnings per share of 35 cents came in 7 cents ahead of Street estimates, but analysts cut profit estimates for the fourth quarter on continuing hurricane constraints. Shares of Huntsman fell $1.03 to $19.25 on the results.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) fell 3 percent to $319 million, negatively impacted $27 million by the hurricanes and $32 million from an unplanned outage at its Port Neches, Texas, propylene oxide/MTBE plant.
“We have recently restarted, or are in the process of restarting, all of our primary units that were impacted by Hurricane Rita and are very encouraged by the rapid increases in selling prices that have occurred in many of our commodity product lines,” said president and CEO Peter Huntsman. “In addition, raw material pressures appear to have eased in recent weeks, which together with initiatives to raise our selling prices in our differentiated segments, should provide opportunities to expand profitability as we enter 2006.”
Merrill Lynch analyst Donald Carson cut his 2005 EPS estimate by 15 cents to $2.15, but maintained his 2006 forecast of $3.20 while reiterating a “buy” rating on the stock.
“Huntsman is expected to take a greater-than-expected earnings hit in the fourth quarter from hurricane-related outages and repairs, but we still expect 21 percent adjusted EBITDA growth next year, and 7 percent sequential growth in the fourth quarter.”
Westlake Corp. also beat the Street as third quarter EPS of 67 cents came in 4 cents ahead of estimates. Profits rose 14 percent to $43.5 million on 6 percent higher sales of $605 million.
Increased selling prices outpaced higher energy and feedstock costs, and volumes gained in PVC resin and pipe.
“We are pleased to report a strong quarter in spite of the effects that hurricanes Katrina and Rita had on energy prices and the economy as a whole,” said president and CEO Albert Chao. “Although our vinyls segment results were below second quarter 2005 performance, we have seen positive signs of improved business activity and higher selling prices.”
BASF AG’s North American arm BASF Corp. posted a 25 percent jump in underlying operating earnings to €110 million ($133 million) on 12 percent higher sales of €2.3 billion.
The company expects the impact of the hurricanes to lop off €140 million in operating earnings in the third and fourth quarters, with €20 million already reflected in third quarter results.
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