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Eastman's first quarter earnings plunge, but company still posts profit

Sharon Hayes • Apr 23, 2009 at 12:00 AM

KINGSPORT — Eastman Chemical Co. posted a sharp drop in earnings for the first quarter of the year. But the Kingsport-based company still posted a profit in the period and expects to report bigger gains for the second quarter of 2009.

Eastman on Thursday posted earnings from continuing operations of $2 million or 3 cents per diluted share for the first quarter vs. $133 million or $1.46 per share a year ago.

The 2009 quarterly results include a $26 million restructuring charge related to the work force reduction of 300 employees, including 200 at the company’s Kingsport site.

Excluding the restructuring charge and one-time items in 2008, first quarter earnings from continuing operations were 25 cents per diluted share vs. $1.48 in the same period a year ago.

“In this very difficult economic environment, we remain focused on taking the actions necessary to deliver operating cash flows that will more than support both our dividend and capital expenditures,” said Eastman Chairman and CEO Brian Ferguson. “We made good progress in the first quarter with solid operating cash flows and are on track to meet this objective.”

Eastman generated $82 million in cash from operating activities in the first quarter. For the year, the company expects to generate solid operating cash flow, including about $100 million in cash from working capital.

Meanwhile sales revenue in the first quarter was $1.1 billion, down 35 percent vs. the same period a year ago. The company reported lower sales in all segments except fibers, which posted a 2 percent increase in sales revenue due to higher selling prices and a favorable shift in product mix.

In the coatings, adhesives, specialty polymers and inks segment, sales revenue dropped by 36 percent in the quarter, primarily due to a sharp decline in demand for products. The segment produces products used in the automotive, building and construction, and packaging markets.

In the performance chemicals and intermediates segment, sales revenue declined by 49 percent. In the performance polymers segment, sales revenue fell by 42 percent. And in the specialty plastics segment, sales revenue declined by 30 percent.

Ferguson plans to step down as CEO after the company’s May 7 shareholders meeting. His successor, Jim Rogers, said Thursday “the global economic environment remains challenging, and visibility for demand continues to be limited.”

“In response to the difficult economic conditions, we have taken a number of cost-reduction actions that will positively impact our financial results throughout the year,” Rogers said.

He said Eastman — assuming a modest improvement in demand — expects second quarter earnings per share to be similar to current analyst estimates of about 71 cents per share. Full year 2009 earnings are expected to be between $2 and $3 per share if product demand increases, he said. Those projections do not include charges related to the company’s cost-reduction actions.

Eastman manufactures and markets chemicals, fibers and plastics and employs 10,300 people worldwide, including about 6,800 in Kingsport.

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