Eastman CEO says 2011 will top strong 2010, but warns on raw materials

01 February 2011 16:25  [Source: ICIS news]

TORONTO (ICIS)--Eastman Chemical expects to increase operating earnings in 2011 but it anticipates higher raw material costs going forward, CEO Jim Rogers said on Tuesday.

Rogers said if volumes come in strong this year, as expected, “and to the extent that the raw materials don’t screw us over,” Eastman expected to improve on a “smash-up [2010] year.”

Earnings per share from continuing operations for 2011 were expected to be slightly more than 10% above the $5.75/share Eastman achieved in 2010, Rogers said.

“As we begin the year, there are clear signs that the global economy continues to strengthen,” he said.

“We are not just bullish on 2011, we see things down the road for 2012 and 2013, and want to keep this high rate of earnings growth going,” Rogers told analysts during Eastman’s 2010 fourth-quarter results conference call.

Eastman Chemical on Monday reported a fourth-quarter net profit of $19m (€14m) on higher sales, up from a $32m net loss in the year-earlier period. Sales were $1.46bn, up 23% from $1.19bn in the 2009 fourth quarter.

Rogers said all of Eastman’s core segments - fibres; coatings, adhesives, specialty polymers and inks (CASPI); specialty plastics; performance chemicals & intermediates (PCI) - were expected to generate higher operating earnings this year.

In fibres, operating earnings should increase about 5% from the $326m achieved in 2010. Higher fibre selling prices should “mostly offset” higher energy and raw materials costs, in particular higher wood pulp costs, Rogers said.

The CASPI segment should increase operating earnings by 5-10% this year, compared with the $299m it recorded in 2010.

The segment would benefit from higher volumes and the restart of an Eastman olefins plant in Texas, in December, Rogers said.

Eastman PCI’s segment was expected to achieve operating earnings of more than $250m in 2011, compared with $231m in 2010.

The PCI segment would benefit from the olefins restart and tight olefin derivative markets, Rogers said.

Specialty plastics was expected to achieve operating earnings only “slightly higher” than the $93m achieved in 2010.

The specialty plastics segment was facing a “substantial increase” in paraxylene (PX) costs, Rogers said.

PX markets were tight because cotton supplies, in turn, were tight, leading textile firms to produce more clothing with polyester fibre. PX is a feedstock for purified terephthalic acid (PTA), which is then used to make polyethylene terephthalate (PET).

“Just in January alone, PX increased 35%, and this is on top of a 25%-increase in the fourth quarter, compared with the third quarter,” Rogers said, adding that it was hard to recover such sharp cost increases in the short-term.

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By: Stefan Baumgarten
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