27 July 2012 14:14 [Source: ICIS news]
By Joseph Chang
NEW YORK (ICIS)--Second-quarter results for chemical companies have been mixed, leaving investors less than impressed. Far more important is the guidance for the second half of 2012, and thus far, that guidance looks weak. The outlook could get even worse if the eurozone debt crisis blows up in Spain.
US-based Dow Chemical’s second quarter profits fell 34% year on year to $649m (€526m) on 6% lower comparable sales of $14.5bn. The sales decline was led by Europe, where sales were down 10% year on year.
Earnings per share of $0.55 came in 9 cents shy of Wall Street estimates. Volumes were down 1% on an adjusted basis, while prices declined 5%.
Dow CEO Andrew Liveris cited a “synchronized global economic slowdown” for the profit decline. Europe is an area of major concern. China’s economy continues to decelerate while in the US, improvement in consumer confidence is moderating, he said on the company’s second quarter conference call.
Looking to the second half, Liveris does not see a recovery as previously expected as the global macro environment remains weak.
“China will not snap back quickly. It may be late this year when it gets back to 8% growth. Right now it is probably 3 or 4, to 5% at best,” he said.
The weak outlook for the second half of 2012 was echoed by Germany-based BASF, the world’s largest chemical company. It does not expect global economic growth to pick up in the second half and said it is unlikely that its chemical earnings in 2012 will match those of 2011.
“At the beginning of the year… we could not have anticipated that the Chinese growth engine would start to stall. In the second quarter our sales in Asia decreased in local currency terms – as they did in the first quarter of 2012,” said CEO Kurt Bock.
“No-one can tell when business will pick up again,” Bock said. Customers are acting very cautiously and continue to reduce inventories to the very minimum. “There are no signs to show that there will be a revival in the second semester,” he said.
US-based DuPont guided Wall Street to the lower end of its expected range of 2012 earnings per share of $4.20–4.40/share based on an uncertain macroeconomic environment. The results are still expected to be higher than the $3.93/share earned in 2011.
For the second quarter, DuPont actually came in 2 cents ahead of Wall Street estimates with earnings per share of $1.48, which represented an 8% gain year on year. However, volumes were down by 1% overall.
On a regional basis, the impact of the eurozone crisis was apparent, with Europe, Middle East and Africa (EMEA) volumes down by 8%. Meanwhile, Asia Pacific volumes fell by 1%.
US-based Celanese also beat Wall Street expectations with second-quarter adjusted earnings per share of $1.47 coming in 7 cents ahead of estimates. Earnings were down by 11% year on year.
Celanese’s second-half outlook is also muted, with CEO Mark Rohr anticipating that “the ongoing challenging economic environment in Europe and the current growth rates in Asia will continue through the remainder of 2012.”
Rohr expects adjusted second-half earnings per share to be slightly below that of the first half.
US chlor-alkali producer Olin provided third-quarter earnings per share guidance of $0.40–0.45 – below consensus estimates of $0.57. Meanwhile, US industrial gases firms Air Products and Praxair also moved guidance lower for the second half of the year.
Eurozone economic weakness and its far-reaching impact is already being baked into the weaker guidance. But the situation continues to deteriorate quickly with Spain’s 10-year debt yield near the 7% level – a level considered unsustainable.
Meanwhile, the US economy staggers along, with leading economic indicators pointing down on the manufacturing side. The same goes for China, although the central bank has been loosening monetary policy to get the economy moving.
The world’s attention remains fixed on the US Federal Reserve, where chairman Ben Bernanke and other officials have hinted at QE3 – another round of quantitative easing. That would be likely to push commodity prices higher and boost business confidence – at least in the near term.
Additional reporting by Nigel Davis in London
($1 = €0.81)
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