KINGSPORT — Eastman Chemical Co. posted a rise in profit for the third quarter this year and shattered Wall Street estimates for its quarterly earnings.
The Kingsport-based company announced net earnings of $101 million or $1.38 per diluted share in the third quarter vs. $100 million or $1.33 per diluted share in the same period of 2008.
Wall Street analysts who track chemical companies expected Eastman to earn an average of $1.13 per share for the third quarter this year.
“We continued to make solid progress improving our profitability during what remains a challenging economic environment,” said Eastman President and CEO Jim Rogers.
Earnings would have been even higher had the company not reversed a previously recognized $12 million investment tax credit for its Beaumont, Texas, industrial gasification project. Eastman reversed the tax credit on its books because of a later estimated project completion date based on front-end engineering and design, and continuing legislative and other uncertainties.
Including the loss of the tax credit, Eastman’s effective tax rate was 40 percent for the third quarter.
“It impacted our earnings by 16 cents (per share),” said company spokesman Tracy Broadwater.
Meanwhile, sales revenue was $1.3 billion in the third quarter this year, down from $1.8 billion in the same period last year.
Operating earnings in the quarter were $191 million vs. $174 million in the year-ago period.
Eastman posts its results by segment. In the coatings, adhesives, specialty polymers and inks segment, sales revenue fell by 18 percent due to lower selling prices and lower sales volume in the quarter. Operating earnings increased due to lower raw material and energy costs and cost-reduction actions.
In the fibers segment, sales revenue declined by 5 percent, while operating earnings rose to $79 million in the quarter vs. $65 million in the year-ago period.
In the performance, chemicals and intermediates segment, sales revenue decreased by 40 percent, while operating earnings totaled $33 million in the quarter vs. $65 million in the same period of 2008.
In the performance polymers segment, sales revenue declined by 36 percent while the segment posted an operating loss of $10 million in the quarter vs. earnings of $1 million in the 2008 period.
And in the specialty plastics segment, sales revenue fell by 21 percent while operating earnings rose to $13 million in the quarter this year vs. $6 million in the 2008 period.
The company generated $331 million in cash from operating activities in the third quarter.
As for positive free cash flow — which is cash from operations less capital expenditures and dividends — the company generated $304 million through the first nine months of this year.
“Cash generation also continues to be a priority, and we did a great job during the quarter generating well over $200 million in free cash flow,” Rogers said.
As for the rest of the year, Rogers said the company expects to continue to benefit from a favorable shift in product mix and cost-reduction actions.
“However, we also expect volatility in raw material and energy costs and a decline in sales volume due to normal seasonality to negatively impact our fourth quarter results,” Rogers said.
As a result, he said, Eastman expects its fourth quarter earnings per share to decline sequentially from its third quarter results but to be above the high end of Wall Street estimates, which is 85 cents per share.
Eastman’s shares, traded on the New York Stock Exchange under the symbol “EMN,” closed Thursday at $56.19, up $1.29 for the day.
Eastman employs 10,000 people worldwide, including 6,800 in Kingsport.