US Eastman to cut workforce as destocking continues in Q1
HOUSTON (ICIS)–Eastman plans to reduce its workforce as part of a $200m cost-cutting programme that will include what it calls an “improved asset footprint” – all part of its response to a manufacturing recession in which destocking has continued into the first quarter, the US-based specialty chemicals producer said on Thursday.
One component of the programme should reduce manufacturing and supply-chain costs by $125m, Eastman said. This component should achieve the following:
- More efficient operations associated with a slow demand environment.
- Optimise Eastman’s supply-chain network.
- Lower the company’s planned manufacturing maintenance schedule when compared with 2022.
- Improve asset footprint to serve customers and lower costs.
Eastman did not elaborate on how it would improve its asset footprint and whether that would entail plant shutdowns.
Another component of the programme will reduce non-manufacturing costs by $75m. Eastman plans to achieve these cost savings by cutting discretionary external spending and by workforce reduction.
Eastman did not specify the magnitude of the workforce reductions.
DESTOCKING AMID MANUFACTURING
The cost-cutting programme is Eastman’s response to what it calls a manufacturing recession that began in the fourth quarter.
The company’s customers in North America, Europe and China undertook inventory destocking that went beyond the levels that are typical of the fourth quarter.
Eastman’s Advanced Materials segment noted aggressive customer inventory destocking for specialty plastic product lines, particularly in end-markets that serve consumer durables.
The segment makes polyvinyl butyral (PVB), copolyesters such as Tritan and cellulose esters such as Treva.
The company’s Additives and Functional Products segment saw destocking especially in building, construction and personal-care end-markets.
The segment makes hydrocarbon resins, rosins, cellulose esters and additives used in inks and coatings.
Eastman’s Chemical Intermediates segment saw destocking across all of its key end-markets.
The segment makes acetic acid, acetate esters, alkylamines, plasticizers, oxo-alcohols, acetyls and glycol ethers.
Eastman’s fourth segment, Fibres, did not report any fourth-quarter destocking. The segment makes acetate tow and cellulosic fibres.
Eastman expects aggressive inventory destocking to end in the first quarter. Volumes should recover modestly in the back half of the year.
Inflation for 2023 should moderate from 2022 levels, during which Eastman’s costs rose by $1.3bn for raw materials, energy and distribution.
Pensions and other post-retirement benefits should increase by $110m. Eastman expects additional headwinds from unfavourable exchange rates.
Nonetheless, 2023 adjusted earnings/share should increase by 5-15%, excluding the 75 cent hit from pensions.
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