KINGSPORT — The sale of PET plants in Mexico and Argentina took a chunk out of Eastman Chemical Co.’s profit line in the third quarter 2007.
The Kingsport-based company on Thursday posted net earnings of $20 million or 24 cents per diluted share for the third quarter this year vs. $95 million or $1.15 per diluted share for the same period of 2006.
This year’s quarterly results include a hit of $120 million in asset impairments and restructuring charges, primarily due to recent agreements to sell the company’s PET polymers plants in Mexico and Argentina. The third quarter results were also impacted by $9 million from continuing restructuring moves at the company’s Longview, Texas, and Columbia, S.C., operations.
Excluding one-time charges, Eastman posted earnings of $1.26 per diluted share in the third quarter this year vs. $1.24 per share in the same period of 2006.
“We continue to deliver strong results throughout the company with the exception of our PET business,” said Eastman Chairman and CEO Brian Ferguson. “This excellent performance reflects focused efforts of Eastman people around the world during ongoing volatility in our key raw material and energy costs.”
As for the faltering PET business, Ferguson said “we continue to make good progress on implementing strategic actions that will substantially improve the results of this business.”
Eastman reported sales revenue of $1.8 billion in the third quarter 2007, down 8 percent from the same time last year.
Revenues were impacted by the performance polymers segment, which includes the PET business. Sales revenue in performance polymers dropped by 37 percent in the period, due mainly to the sale of the polyethylene business. Sales revenue from PET product lines also fell — by 17 percent due to lower sales volume.
Eastman has taken steps to improve its position in PET. It divested its PET plant in Spain and has entered into the agreement to sell those plants in Mexico and Argentina.
In the United States, Eastman constructed a $100 million plant at its Columbia, S.C., operation. That facility uses the new IntegRex technology, which allows the company to produce PET more efficiently.
As for Eastman’s other segments, sales revenue increased by 17 percent in the performance chemicals and intermediates segment in the third quarter this year.
In the fibers segment, sales revenue rose by 14 percent in the third quarter 2007.
In the specialty plastics segment, sales revenue rose by 5 percent in the quarter vs. last year.
And in the coatings, adhesives, specialty polymers and inks segment, sales revenue in the third quarter was similar to results in the same period a year ago.
Overall, Eastman’s operating earnings in the third quarter were $40 million this year vs. operating earnings of $158 million in the period a year ago.
Excluding one-time charges, operating earnings were $169 million in the third quarter this year vs. $171 million in the same period last year.
Eastman generated $312 million in cash from operations during the third quarter, and the company repurchased 3.2 million shares in the period, completing a $300 million share repurchase authorized by the company’s board of directors earlier this year.
As for the rest of the year, Ferguson said the company expects normal seasonal fluctuations to reduce demand in most of the company’s businesses and product lines during the fourth quarter.
He said Eastman also expects continued volatility in raw material and energy costs.
“As a result, we expect fourth quarter 2007 earnings per share to be similar to fourth quarter 2006 earnings per share of $1 excluding gains and charges related to strategic decisions in both periods,” he said.
Eastman posted sales of $7.5 billion in 2006. The company employs 11,000 people, including 7,500 in Kingsport.