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Eastman sees sales and earnings fall in the face of difficult economic environment
FINANCIALS
company of US$32 million on net sales of $845 million. The sales total was only marginally lower than the $854 million achieved in the comparable period of fiscal 2018 but net income was substantially reduced from $88 million a year earlier. In the nine months to the end of June 2019, the company reported net sales of $2.51 billion, up 4.9% year on year. Net income for the same period was $124 million, reversing a loss of $207 million in the first three quarters of fiscal 2018. Cabot CEO Sean Keohane describes the third-quarter results as ‘solid’ despite a ‘challenging economic environment’ that impacted results in the company’s Reinforcement Materials and Performance Chemicals segments. Among the challenges faced were a weak business environment in China and continued softness in automotive production, particularly in China and the EMEA (Europe, Middle East & Africa) region, he says. These factors were partially offset by the favourable impact from calendar year 2019 agreements with tyre customers and the improved results in the Purification Solutions segment. ‘Given the current business environment, we continued to take actions to reduce costs and have lowered our capital expenditures forecast for the year’, Keohane reports. However, the company remains ‘committed to investing for growth’ in its core businesses, he says, as demonstrated by the commissioning of its fumed silica plant in Wuhai, China, during 3Q fiscal 2019 [ADPO, October 2017, pp. 6–7]. Cabot anticipates that the start-up of the fumed silica plant, alongside targeted customer actions and incremental cost measures, will boost fourth quarter performance and help offset the effects of the unexpectedly lengthy weakness in automotive production and the lack of resolution to the US–China trade dispute. The Reinforcement Materials segment reported sales of $461 million in 3Q fiscal 2019 compared to sales of $466 million a year earlier. EBIT of $72 million in the fiscal 2019 third quarter was $2 million lower compared to the previous year. The decline was principally due to lower margins in China and reduced volumes associated with weak automotive production, Cabot says. These impacts were partially offset by the favourable terms of the calendar year 2019 tyre customer agreements. Globally, volumes decreased 2% year over year, with a 2% improvement in Asia driven by China, a 7% decrease in EMEA due to softer automotive production and a 3% decline in the Americas because of weaker volumes in Latin America. Sequentially, EBIT improved by $11 million and sales by $16 million compared to 2Q fiscal 2019 figures.
October 2019
In Cabot’s Performance Chemicals segment, sales in 3Q fiscal 2019 were $251 million, down from $274 million for the same period of the previous year. EBIT decreased by $19 million from $56 million in 3Q fiscal 2018 to $37 million this year. The decline was primarily due to lower volumes and a less-favourable product mix, the latter being attributed largely to the speciality carbons product line where the company saw continued weakness in automotive and fibre products. Volumes decreased by 2% year over year in the Performance Additives business, primarily due to the fumed metal oxides product line, and by 2% in the Formulated Solutions business because of lower inkjet colorants sales. More information: www.cabotcorp.com
Eastman sees sales and earnings fall in the face of difficult economic environment
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dvanced materials and additives company Eastman Chemical Co, headquartered in Kingsport, TN, USA, generated sales revenue of US$2.36 billion in the second quarter of 2019, a decline of almost 10% from sales of $2.62 billion for the same period in the previous year. Net earnings attributable to Eastman totalled $258 million in 2Q 2019, down 25% year on year compared to earnings of $344 million 12 months earlier. Earnings before interest and taxes (EBIT) fell by nearly 25%, from $491 million in 2Q 2018 to $371 million this year, while adjusted EBIT was 13% lower at $389 million. However, adjusted EBIT grew sequentially by 11%. The company continued to face ‘challenging global economic conditions resulting from trade issues impacting consumer discretionary markets such as transportation and consumer durables’, notes Eastman’s CEO Mark Costa. The slower global economic growth resulted in reduced demand and an unfavourable product mix for the company’s speciality products, particularly in China and Europe, he says. All four of Eastman’s reporting segments experienced year-on-year declines in sales revenues and EBIT in 2Q 2019. The Additives & Functional Products segment posted sales of $823 million in 2Q 2019, almost 13% lower than the sales result of $942 million for the same quarter in 2018. The decrease was due to lower sales volume and less favourable product mix, which together
Additives for Polymers
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reduced revenue by 8%. This decline was primarily attributed to weaker end-market demand resulting from global trade-related pressures, particularly in transportation and other consumer discretionary markets in China and Europe, the company reports. Lower selling prices as a result of lower raw material costs and increased competitive pressure reduced the segment’s sales total by 3%, and an unfavourable shift in foreign currency exchange rates also had a negative (-2%) impact on the segment’s quarterly revenue. For similar reasons reported EBIT decreased from $192 million in 2Q 2018 to $147 million this year, although the lower raw material costs counterbalanced the reduced selling prices, and continued cost management also partially offset the declines. Eastman does not expect underlying macroeconomic conditions to improve in the second half of 2019, apart from reduced customer inventory destocking. However, it does anticipate benefiting from cost reduction actions and the flow through of lower-cost raw materials. More information: www.eastman.com
Songwon reports double-digit growth in quarterly sales and profit
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outh Korea’s Songwon Industrial Group reported consolidated sales of KRW218.5 billion (c. E170 million) and profit of KRW12.8 billion for the second quarter of 2019, representing year-on-year increases of 10.4% and 56.8%, respectively. These figures mark a return to solid growth for the company after its unexpectedly slow start to 2019 [ADPO, July 2019, pp. 9–10] and despite the continuing suboptimal market conditions for the worldwide chemical industry. Songwon reports that it ‘exceeded targets’ and achieved an increase in core volumes in 2Q 2019 although ‘global economic and political uncertainties [including escalation in the US–China trade war and Brexit uncertainty] were still acutely present’ throughout the reporting period. The second quarter is traditionally ‘robust’, the company says, and it noted stronger overall demand for both its Industrial Chemicals and Performance Chemicals divisions compared to the previous quarter. It achieved EBITDA of KRW32.8 billion (+58.5%) and EBIT of
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KRW23.5 billion (+90.7%) in 2Q 2019, with the related EBITDA and EBIT margins also increasing significantly to 15.0% and 10.8%, respectively. The Industrial Chemicals division, which mainly comprises the company’s polymer stabilizers product lines, achieved sales of KRW161.7 billion in 2Q 2019, up 12.7% compared to KRW143.5 billion a year earlier, aided by positive foreign currency effects and the price increases implemented in 2018, Songwon says. Sales in its Performance Chemicals division rose 4.5% to KRW56.7 billion, despite the continuing negative growth rate in South Korea due to the economic situation and the slowdown in the automotive industry, it reports. Sales were stable in the company’s domestic market at KRW44.6 billion (+0.9%) and showed good growth in all other regions. Europe experienced the highest growth, with sales up 16.7% year on year to KRW51.7 billion. Throughout the second quarter of 2019, all Songwon’s productions sites ran smoothly and at higher capacity utilizations than in the first quarter of the year, helping to optimize the company’s cost position in the period. Some raw material tensions and restrictions resulting from an accident in China were noted in the quarter but Songwon says it was unaffected by the shortages ‘due to its effective sourcing strategy involving multiple suppliers’. For the first half of 2019, the Songwon group realized consolidated sales of KRW408.9 billion, a 5.3% increase compared to KRW388.3 billion in 1H 2018, which it attributes to the positive impact of the price increases implemented across its portfolio combined with favourable foreign currencies over the six months. Net profit for the period increased by 9.6% to KRW21.6 billion. The company continued to invest in and expand its Technical Innovation Centre in Ulsan [ADPO, June 2017, p. 6] during the first half of 2019 and believes that this on-going process will drive long-term growth across its businesses. The innovation labs are operating at ‘high levels’ and additional expertise has been added to drive customer application and new product development work, Songwon reports. For the remainder of 2019, Songwon expects demand for its product portfolio to remain steady in line with the ‘solid performance’ seen in the second quarter, despite the ‘pervasive uncertainties’ across the globe. It anticipates that supply and demand will remain balanced and says that it will focus on maintaining its achieved price levels and on increasing its supply share in the markets it serves. More information: www.songwon.com
October 2019
company of US$32 million on net sales of $845 million. The sales total was only marginally lower than the $854 million achieved in the comparable period of fiscal 2018 but net income was substantially reduced from $88 million a year earlier. In the nine months to the end of June 2019, the company reported net sales of $2.51 billion, up 4.9% year on year. Net income for the same period was $124 million, reversing a loss of $207 million in the first three quarters of fiscal 2018. Cabot CEO Sean Keohane describes the third-quarter results as ‘solid’ despite a ‘challenging economic environment’ that impacted results in the company’s Reinforcement Materials and Performance Chemicals segments. Among the challenges faced were a weak business environment in China and continued softness in automotive production, particularly in China and the EMEA (Europe, Middle East & Africa) region, he says. These factors were partially offset by the favourable impact from calendar year 2019 agreements with tyre customers and the improved results in the Purification Solutions segment. ‘Given the current business environment, we continued to take actions to reduce costs and have lowered our capital expenditures forecast for the year’, Keohane reports. However, the company remains ‘committed to investing for growth’ in its core businesses, he says, as demonstrated by the commissioning of its fumed silica plant in Wuhai, China, during 3Q fiscal 2019 [ADPO, October 2017, pp. 6–7]. Cabot anticipates that the start-up of the fumed silica plant, alongside targeted customer actions and incremental cost measures, will boost fourth quarter performance and help offset the effects of the unexpectedly lengthy weakness in automotive production and the lack of resolution to the US–China trade dispute. The Reinforcement Materials segment reported sales of $461 million in 3Q fiscal 2019 compared to sales of $466 million a year earlier. EBIT of $72 million in the fiscal 2019 third quarter was $2 million lower compared to the previous year. The decline was principally due to lower margins in China and reduced volumes associated with weak automotive production, Cabot says. These impacts were partially offset by the favourable terms of the calendar year 2019 tyre customer agreements. Globally, volumes decreased 2% year over year, with a 2% improvement in Asia driven by China, a 7% decrease in EMEA due to softer automotive production and a 3% decline in the Americas because of weaker volumes in Latin America. Sequentially, EBIT improved by $11 million and sales by $16 million compared to 2Q fiscal 2019 figures.
October 2019
In Cabot’s Performance Chemicals segment, sales in 3Q fiscal 2019 were $251 million, down from $274 million for the same period of the previous year. EBIT decreased by $19 million from $56 million in 3Q fiscal 2018 to $37 million this year. The decline was primarily due to lower volumes and a less-favourable product mix, the latter being attributed largely to the speciality carbons product line where the company saw continued weakness in automotive and fibre products. Volumes decreased by 2% year over year in the Performance Additives business, primarily due to the fumed metal oxides product line, and by 2% in the Formulated Solutions business because of lower inkjet colorants sales. More information: www.cabotcorp.com
Eastman sees sales and earnings fall in the face of difficult economic environment
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dvanced materials and additives company Eastman Chemical Co, headquartered in Kingsport, TN, USA, generated sales revenue of US$2.36 billion in the second quarter of 2019, a decline of almost 10% from sales of $2.62 billion for the same period in the previous year. Net earnings attributable to Eastman totalled $258 million in 2Q 2019, down 25% year on year compared to earnings of $344 million 12 months earlier. Earnings before interest and taxes (EBIT) fell by nearly 25%, from $491 million in 2Q 2018 to $371 million this year, while adjusted EBIT was 13% lower at $389 million. However, adjusted EBIT grew sequentially by 11%. The company continued to face ‘challenging global economic conditions resulting from trade issues impacting consumer discretionary markets such as transportation and consumer durables’, notes Eastman’s CEO Mark Costa. The slower global economic growth resulted in reduced demand and an unfavourable product mix for the company’s speciality products, particularly in China and Europe, he says. All four of Eastman’s reporting segments experienced year-on-year declines in sales revenues and EBIT in 2Q 2019. The Additives & Functional Products segment posted sales of $823 million in 2Q 2019, almost 13% lower than the sales result of $942 million for the same quarter in 2018. The decrease was due to lower sales volume and less favourable product mix, which together
Additives for Polymers
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FINANCIALS
reduced revenue by 8%. This decline was primarily attributed to weaker end-market demand resulting from global trade-related pressures, particularly in transportation and other consumer discretionary markets in China and Europe, the company reports. Lower selling prices as a result of lower raw material costs and increased competitive pressure reduced the segment’s sales total by 3%, and an unfavourable shift in foreign currency exchange rates also had a negative (-2%) impact on the segment’s quarterly revenue. For similar reasons reported EBIT decreased from $192 million in 2Q 2018 to $147 million this year, although the lower raw material costs counterbalanced the reduced selling prices, and continued cost management also partially offset the declines. Eastman does not expect underlying macroeconomic conditions to improve in the second half of 2019, apart from reduced customer inventory destocking. However, it does anticipate benefiting from cost reduction actions and the flow through of lower-cost raw materials. More information: www.eastman.com
Songwon reports double-digit growth in quarterly sales and profit
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outh Korea’s Songwon Industrial Group reported consolidated sales of KRW218.5 billion (c. E170 million) and profit of KRW12.8 billion for the second quarter of 2019, representing year-on-year increases of 10.4% and 56.8%, respectively. These figures mark a return to solid growth for the company after its unexpectedly slow start to 2019 [ADPO, July 2019, pp. 9–10] and despite the continuing suboptimal market conditions for the worldwide chemical industry. Songwon reports that it ‘exceeded targets’ and achieved an increase in core volumes in 2Q 2019 although ‘global economic and political uncertainties [including escalation in the US–China trade war and Brexit uncertainty] were still acutely present’ throughout the reporting period. The second quarter is traditionally ‘robust’, the company says, and it noted stronger overall demand for both its Industrial Chemicals and Performance Chemicals divisions compared to the previous quarter. It achieved EBITDA of KRW32.8 billion (+58.5%) and EBIT of
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Additives for Polymers
KRW23.5 billion (+90.7%) in 2Q 2019, with the related EBITDA and EBIT margins also increasing significantly to 15.0% and 10.8%, respectively. The Industrial Chemicals division, which mainly comprises the company’s polymer stabilizers product lines, achieved sales of KRW161.7 billion in 2Q 2019, up 12.7% compared to KRW143.5 billion a year earlier, aided by positive foreign currency effects and the price increases implemented in 2018, Songwon says. Sales in its Performance Chemicals division rose 4.5% to KRW56.7 billion, despite the continuing negative growth rate in South Korea due to the economic situation and the slowdown in the automotive industry, it reports. Sales were stable in the company’s domestic market at KRW44.6 billion (+0.9%) and showed good growth in all other regions. Europe experienced the highest growth, with sales up 16.7% year on year to KRW51.7 billion. Throughout the second quarter of 2019, all Songwon’s productions sites ran smoothly and at higher capacity utilizations than in the first quarter of the year, helping to optimize the company’s cost position in the period. Some raw material tensions and restrictions resulting from an accident in China were noted in the quarter but Songwon says it was unaffected by the shortages ‘due to its effective sourcing strategy involving multiple suppliers’. For the first half of 2019, the Songwon group realized consolidated sales of KRW408.9 billion, a 5.3% increase compared to KRW388.3 billion in 1H 2018, which it attributes to the positive impact of the price increases implemented across its portfolio combined with favourable foreign currencies over the six months. Net profit for the period increased by 9.6% to KRW21.6 billion. The company continued to invest in and expand its Technical Innovation Centre in Ulsan [ADPO, June 2017, p. 6] during the first half of 2019 and believes that this on-going process will drive long-term growth across its businesses. The innovation labs are operating at ‘high levels’ and additional expertise has been added to drive customer application and new product development work, Songwon reports. For the remainder of 2019, Songwon expects demand for its product portfolio to remain steady in line with the ‘solid performance’ seen in the second quarter, despite the ‘pervasive uncertainties’ across the globe. It anticipates that supply and demand will remain balanced and says that it will focus on maintaining its achieved price levels and on increasing its supply share in the markets it serves. More information: www.songwon.com
October 2019