US Eastman Q3 net income falls 2.9% on outage, other charges

28 October 2011 00:33  [Source: ICIS news]

HOUSTON (ICIS)--Eastman Chemical's third-quarter net income fell by 2.9% to $165m (€119m) as costs associated with a unplanned outage in Texas and the acquisition of Sterling Chemicals took a bite out of profits, the US-based chemicals, fibres and plastics producer said on Thursday.

Sales revenue for third quarter was $1.8bn, a 20% increase compared with third quarter 2010 primarily as a result of higher sales prices, Eastman said.

Operating earnings, excluding restructuring charges, totalled $263m in the third quarter, compared with $266m in the third quarter last year.

The company incurred $11m in costs during the third quarter as a result of an unplanned outage of an olefins cracker at its Longview complex in Texas, Eastman said.

Eastman shut down its 141,000 tonne/year Longview cracker 3 for three weeks in July on account of a vibration problem.

Eastman said it also incurred $7m in restructuring charges stemming from its acquisition of Sterling Chemicals. Eastman completed its $100m purchase of Sterling in August.

The company also said it earned $8m from an acetyl technology licence.

In comparison, Eastman’s third-quarter operating earnings for 2010 included $22m from the partial settlement of an insurance claim related to a power outage at Longview.

Operating earnings for Eastman’s coatings, adhesives, specialty polymers and inks segment dropped to $82m from $89m in the same quarter last year, while sales revenue increased by 14%.

Eastman’s third-quarter fibres segment’s operating earnings increased to $92m from $89m in the third quarter in 2010 and sales revenue increased by 11% as a result of a “favourable shift in product mix and higher selling prices”, mainly the result of increased utilisation of an acetate tow plant in Korea.

Third-quarter performance chemicals and intermediates operating earnings increased to $78m from $74m in the same quarter last year, while sales revenue increased by 39%.

Specialty plastics operating earnings were $29m, flat with the third quarter of 2010, while sales revenue increased by 4%.

“The lower sales volume was attributed to weakened demand for copolyester product lines, particularly in packaging, consumer durable goods and LCD end markets, customer inventory destocking, and some customer shift to other plastic materials that do not use paraxylene [PX] as a raw material,” Eastman said.   

Looking forward, CEO Jim Rogers said he expects fourth-quarter sales volume to fall as a result of normal market seasonality and customer inventory destocking.

“We also expect continued volatility in raw material and energy costs,” he said.

Eastman shares closed on Thursday at $40.05, up $2.43 on the New York Stock Exchange.

($1 = €0.72)

By: Brian Ford
+1 713 525 2653

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