Times-News file photo.
KINGSPORT - Eastman Chemical Co. on Thursday posted a decline in earnings in the second quarter of this year, reflecting weak results in the company's performance polymers and fibers segments.
The Kingsport-based company reported net income of $105 million, or $1.22 a share in the second quarter, down from $114 million, or $1.37 a share, in the same period a year ago.
Excluding one-time items, the company posted earnings of $1.34 a share vs. $1.40 a share in the year-ago period.
"Our second-quarter results demonstrate that we remain focused on delivering strong earnings from our solid base of businesses," said Eastman Chairman and Chief Executive Officer Brian Ferguson. "At the same time, we are making great progress on our strategic initiatives, including two gasification projects in the Gulf Coast."
Sales revenue declined slightly in the second quarter to $1.9 billion vs. $1.93 billion in the same period of 2006. Excluding certain contract sales and sales from divested product lines, sales revenue rose by 6 percent, thanks mainly to higher selling prices.
Meanwhile, operating earnings in the second quarter totaled $168 million vs. $190 million in the year-ago period.
The company continued to feel the pinch of rising raw material and energy costs. In the second quarter, those costs increased by about $50 million for Eastman compared with the same time last year.
In the company's segments, the performance, chemicals and intermediates showed strong results, as sales revenue increased by 28 percent in the quarter due to higher sales volume. Operating earnings, excluding accelerated depreciation costs, rose to $64 million in the quarter, representing the segment's best quarterly performance in a decade.
In the specialty plastics segment, sales revenue rose by 7 percent in the quarter, primarily due to higher selling prices. Operating earnings excluding one-time items rose to $20 million in the quarter, up from $14 million in the year-ago period.
In the coatings, adhesives, specialty polymers and inks segment, sales revenue increased by 4 percent, thanks to higher selling prices, a favorable shift in product mix, and positive effects of a strengthening euro vs. the U.S. dollar. Excluding asset impairment and restructuring charges of $1 million in the quarter, operating earnings were $66 million for the segment vs. $69 million in the same period of 2006.
In the fibers segment, sales revenue was flat in the quarter, while operating earnings were $51 million, down from $61 million in the same period a year ago.
And in the performance polymers segment, sales revenue fell by 26 percent due primarily to the divestiture of the polyethylene business. Sales revenue for PET polymers dropped 3 percent. Excluding one-time items, the PET product lines posted a loss of $6 million in the quarter vs. a loss of $1 million in the year-ago period.
Eastman generated $165 million in cash from operating activities in the second quarter. The company said it will use available cash to pay the dividend, fund targeted growth initiatives, and repurchase shares under its share repurchase plan. During the second quarter, share repurchases totaled $53 million.
As for the third quarter, Ferguson said the company expects continued solid results in all segments, with the exception of performance polymers outside the United States.
"We also expect continued high and volatile raw material and energy costs for the company," Ferguson said. "As a result, we expect third-quarter 2007 earnings per share excluding items related to ongoing strategic decisions to be slightly above third-quarter 2006 earnings per share excluding items of $1.24."
Eastman manufactures and markets chemicals, fibers and plastics, and employs 11,000 people worldwide, including 7,500 in Kingsport. The company posted sales of $7.5 billion in 2006.
Traded on the New York Stock Exchange, Eastman's stock closed Thursday at $67.27, down $2.32 for the day.