InterviewUS chems to be wary about H2 as earnings season starts

12 July 2010 22:45  [Source: ICIS news]

By Al Greenwood

HOUSTON (ICIS news)--US chemical producers may give cautious outlooks for the second half of the year as the earnings season begins, an analyst said on Monday.

In the important automobile end market, companies may have overestimated demand for second half, said Dmitry Silversteyn, a senior research analyst who covers specialty chemicals for Longbow Research.

Construction, meanwhile, continues to be weak.

In all, companies may provide a cautious guidance for the second half of the year, he noted.

The companies that provide good guidance will have pricing power, he said.

For the second quarter, Silversteyn said companies would focus on margins instead of sales volumes.

Some companies - particularly those the rely on feedstock acrylics - will report trouble finding material, he said.

Outages shortened supplies of methyl methacrylate (MMA), used as a raw material in paint, adhesives and sealants, Silversteyn said.

The shortage could last well into August, he said.

Other second quarter trends included the US dollar strengthening against the euro, he said.

Silversteyn made his comments on the same day that Alcoa released its second-quarter results, marking the start of the US earnings season.

Alcoa reported a net income of $137m (€108m) for the second quarter ending on 30 June. For the same time last year, Alcoa reported a loss of $312m.

Second-quarter sales were $5.19bn, up 22.4% from $4.24bn in the same time last year.

Although Alcoa marked the start of the earnings season, a few chemical companies already had released their earnings.

US compounder A Schulman reported that its fiscal third-quarter net income more than tripled to $25.8m as sales rose by 41.2%.

Meanwhile, US adhesives producer HB Fuller reported a second-quarter net income of $11m, down 37% year over year, due to the company discontinuing its glass sealant line in Europe.

HB Fuller said that raw material costs would likely increase about 8% for the full year, but noted that corresponding price increases were underway.

As a result, second-half gross margins should improve over the first half, it said.

US paint producer PPG Industries expected that second-quarter earnings per share would double from the first quarter.

PPG attributed the expected increase to volume growth in industrial coatings, specialty materials, commodity chemicals and its glass segment.

PPG is scheduled to report its results on 15 July.

 ($1 = €0.79)

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By: Al Greenwood
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