KINGSPORT - Eastman Chemical Co. on Thursday blamed a loss in its performance polymers business for a 27 percent decline in earnings in the first quarter this year.
The Kingsport-based company posted net earnings of $77 million, or 91 cents a share, in the first quarter vs. $105 million, or $1.27 a share, in the year-ago period.
Eastman Chairman and CEO Brian Ferguson said operating earnings for the company remained strong in the first quarter vs. last year "with the exception of our PET business."
Eastman is the world's leading supplier of PET for plastic packaging. Its PET business is included in its performance polymers segment, which reported an operating loss of $23 million in the first quarter this year. Eastman said the decline was due to lower selling prices and higher, volatile raw material and energy costs.
The company's raw material and energy costs rose by $50 million in the first quarter vs. the same period of 2006.
Eastman's earnings in the first quarter included $14 million in depreciation costs resulting from restructuring actions at its Longview, Texas, and Columbia, S.C., facilities. The results also included asset impairments and restructuring charges of $21 million, primarily from the divestiture of its PET plant in San Roque, Spain.
Ferguson said Eastman is making good progress offsetting high and volatile raw material and energy costs.
"And we remain confident the actions being taken with our PET business will substantially improve results in the performance polymers segment," Ferguson said.
Excluding one-time items, first quarter earnings were $1.19 per share vs. $1.36 per share in the same period a year ago.
Operating earnings in the first quarter this year were $135 million vs. $184 million in the first quarter a year ago.
Sales revenue in the first quarter was $1.8 billion, unchanged from the 2006 period. However, the first quarter sales figures included contract ethylene sales resulting from the divestiture of the polyethylene business, while first quarter 2006 results included sales from divested product lines. Excluding those contract sales and sales from divested product lines, sales revenue increased 10 percent in the first quarter this year thanks to higher sales volume of 5 percent and higher selling prices.
Eastman is divided into several business segments. In the coatings, adhesives, specialty polymers and inks (CASPI) segment, sales revenue dropped by 1 percent, while operating earnings increased to $65 million in the first quarter this year vs. $62 million in the same period last year. Those results do not include asset impairments and restructuring charges of $7 million.
In the fibers segment, sales revenue increased by 2 percent, while operating earnings fell to $59 million vs. $66 million in the first quarter of 2006, primarily due to lower sales volume and higher raw material and energy costs.
In the performance chemicals and intermediates segment, sales revenue rose by 27 percent in the quarter, while operating earnings rose to $61 million vs. $41 million in the same period a year ago.
In the performance polymers segment - which includes the PET business - sales revenue declined by 22 percent, partly due to the divestiture of the polyethylene business in the fourth quarter 2006. Sales revenue in continuing PET product lines rose 9 percent due to higher sales volume. And operating results from continuing PET lines declined to a loss of $23 million in the first quarter vs. a loss of $6 million in the same period of 2006.
And in the specialty plastics segment, sales revenue rose by 13 percent while operating earnings remained flat at $18 million.
As for the second quarter this year, Ferguson said the company expects "continued solid results in all of our segments, with the exception of performance polymers, despite continued high and volatile raw material and energy costs."
For the performance polymers segment, Eastman anticipates improved results sequentially thanks to the company's new PET facility in South Carolina. Eastman has invested $100 million to build the new IntegRex plant, which is designed to produce more than twice as much PET as the older, larger plants in a much smaller facility, which will use less energy. The new facility will produce 350,000 metric tons of PET a year.
Ferguson said he expects second quarter earnings per share - excluding one-time items - to be between the middle and low end of analyst estimates. Those estimates currently range from $1.14 to $1.64.
Traded on the New York Stock Exchange, Eastman's stock closed Thursday at $66.66, down $1.13 for the day.
Eastman employs 11,000 worldwide, including 7,500 in Kingsport.