Eastman won't divest adhesives, plasticisers, despite tough year

31 January 2014 17:11  [Source: ICIS news]

HOUSTON (ICIS)--Eastman Chemical is not divesting its adhesives and plasticizers business, which it still sees as a "good business" even after the segment’s operating earnings fell 34% year on year in 2013, the CEO of the US-based producer said on Friday.

"We had one year of tough times and we need to let things play out a little bit", Mark Costa told analysts during Eastman’s fourth-quarter earnings call.

"We are going to continue to invest in [adhesives and plasticisers] this year, fixing it and making it more cost-competitive, see how things go, and then we will make the appropriate decision", he added.

Costa was responding to an analyst who questioned whether Eastman should keep that business in the long run. 

The CEO said that it was a "fair question" given Eastman’s disciplined portfolio management and its moves into specialties while exiting underperforming businesses.

However, even at its current performance level, adhesives and plasticizers was still a "value-creating" business, Costa said.

For 2013, adhesives and plasticisers recorded operating earnings of $173m, down from $263m in 2012 – the only of Eastman’s five business segments to record a year-on-year decline in operating earnings.

The segment's profit decline was due to lower selling prices; lower adhesive resin sales volumes; and higher raw material and energy costs.

For 2014, Eastman is projecting the segment’s operating earnings at $150m-170m. Adhesives and plasticizers is one of three Eastman businesses facing challenges from high propane costs.

By: Stefan Baumgarten
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