US chemicals cautious on earnings outlooks

22 October 2008 16:56  [Source: ICIS news]

HOUSTON (ICIS news)--US chemical firms Stepan and Rohm and Haas issued cautious but optimistic earnings outlooks on Wednesday for the remainder of the fiscal year amid concerns about a recession.

“Despite the difficult economic environment, we will deliver record results for the year,” said F Quinn Stepan, president and CEO of Stepan, whose third-quarter net income increased more than fivefold to $17m (€13m) from $3m a year earlier on one-off gains and a 28% increase in sales.

However, Stepan cautioned that the outlook for its polymer businesses would likely be tough in the fourth quarter.

“Polyol volume continued to grow due to higher global insulation standards but margins declined during the third quarter,” Stepan said. “Price increases for polyol have been announced for the fourth quarter.”

Stepan continued, “Merchant phthalic anhydride sales are not expected to recover for several quarters due to the impact of the recession, however, Stepan's internal use of phthalic anhydride is growing in its polyol product line.”

During the fourth quarter, “our phthalic anhydride and polyol manufacturing facilities at Millsdale, Illinois will undergo their triennial maintenance turnaround,” Stepan said.

“Consequently, higher outsourcing and maintenance costs will negatively impact fourth quarter polymer results,” Stepan continued. “Our cost reduction and cash generating initiatives should help us minimise the recession's impact on our business.”

Rohm and Haas, which reported a 1.6% increase in third-quarter net income, delivered an optimistic forecast.

“Our confidence in a bright future for Rohm and Haas Company remains high, and we fully expect to deliver outstanding results for all our stakeholders as we look forward to the merger with The Dow Chemical Company,” said CEO Raj Gupta.

ConocoPhillips said little in its Q4 outlook regarding its chemical business, which saw its third-quarter earnings plunge to $46m from $110m during the same period last year.

The outlooks by Stepan and Rohm and Haas contrasted with forecasts earlier this week by Celanese and DuPont.

On Monday, acetyls producer Celanese lowered its 2008 forecast on concerns that many of its markets are in a recession.

Chemical major DuPont lowered its 2008 outlook due to hurricanes and weaker demand.

Ashland gave advanced warning for its upcoming quarterly earnings report, saying its water-technologies business will record a loss.

The warnings initially started slowly. Adhesives producer HB Fuller warned on 8 September that its 2008 earnings could fall by 9-17% below its initial expectations due to higher raw-material costs.

Coatings producer RPM issued its warning a month later, attributing its lower forecast to weak markets, fiscal turmoil and raw-material costs.

Composites producer Cytec Industries lowered its 2008 forecast on 10 October, blaming hurricanes and a weak economy.

Analysts have slashed their own estimates of companies' performance, saying that the US and much of the developed world are in a recession.

Additional reporting by Al Greenwood

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