Eastman sees end to destocking - CEO-designate Rogers

24 April 2009 16:08  [Source: ICIS news]

TORONTO (ICIS news)--Eastman Chemical is seeing an end to destocking in the chemicals industry, CEO-designate Jim Rogers said on Friday.

“We are getting to the end of destocking,” Rogers said during a webcast conference call in which he briefed analysts on the company's 98.5% drop in first-quarter profit.

“But this doesn’t mean there is absolutely no more destocking and we are done across the board. It really is product line by product line and region by region, but we are getting to the end of destocking for a number of our customers and areas we sell into,” he said.

Eastman’s capacity utilisation rate was 71% in the first quarter, with demand probably running ahead of that level as Eastman was working down inventories, he said. 

For the second quarter, the trend seemed better than “just flat or down”, Rogers said.

“But I don’t want to get everyone’s hopes up that somehow Eastman is calling an end to the whole thing,” he said.

“I have been fooled before, when we have seen two or three weeks go up but [rates] came right back down the next week.” 

Assuming that increases in demand will boost capacity utilisation to 75-80%, Eastman expects 2009 earnings per share of $2-3 (€1.50-2.30), excluding charges related to cost reductions. This compares with earnings per share from continuing operations of $4.31/share in 2008.

Asked by analysts about the of the latest wave of temporary auto plant shutdowns announced by General Motors this week, Rogers said it would be difficult to trace precise impacts from the shutdowns and their duration to Eastman.

“I have trouble breaking out these kinds of news stories from day to day in terms of having an impact on us,” Rogers said.

The auto sector was one of the end-markets that was hurting Eastman’s coatings, adhesives, specialty polymers and inks (CASPI) segment the most, Rogers said.

CASPI has about 20% exposure to the auto market, he said.

However, that market included new cars as well as repaints for old cars.

“If you don’t build any cars, you are more likely to take care of the old cars. That almost has a utility function,” Rogers said.

However, Rogers also said that one Eastman customer, who sold into the auto industry, predicted destocking in that market would continue to September. Rogers called that "the longest I have heard".

Rogers, currently Eastman president and head of its chemicals and fibres business, is due to take over as CEO from Brian Ferguson on 7 May.

($1 = €0.76)

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By: Stefan Baumgarten
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