Third-quarter earnings were mixed for chemical companies listed in the CW100. Strong overseas demand in the quarter offset a weak North American market, chemical firms say. Higher oil, gas, and raw materials costs weighed on margins in the quarter, however, producers say.
Dow Chemical’s net income fell 21%, to $403 million (42 cts/share), including $362 million in charges resulting from a change in German tax law as well as R&D expenditures. Earnings were 84 cts/share excluding the charges, and fell short of First Call’s (Boston) consensus estimate of 90 cts/share.
Dow’s overall revenues rose 5%. Demand grew 7% in Europe and Asia/Pacific, and 9% in Latin America, Dow says. North American demand rose despite continued weakness in the U.S. housing and automotive sectors, but volumes fell in the Africa, Mideast, and India region because of Dow’s divestiture of its Safripol (Sasolburg, South Africa) business in late 2006, Dow says. Raw material costs rose by $380 million year-over-year, but Dow says it was “able to achieve some level of margin recovery.’”
Dow’s Ebit rose in all businesses, except in performance chemicals and basic plastics. Performance chemicals‚ profits were hurt by the R&D charge, and basic plastics by the German tax laws. Sales were up across all businesses.
“Global economic conditions remain reasonably healthy, even though there may be some concerns about the resilience of the U.S. economy going forward,” says Andrew Liveris, Dow chairman and CEO. The company’s “most pressing” challenges are high and volatile feedstock and energy costs, Liveris says.
DuPont earned 56 cts/share, including an unspecified litigation charge. Earnings were 59 cts/share excluding that charge, and beat First Call’s 52 cts/share estimate. DuPont’s sales generated outside the U.S. drove revenue growth, and accounted for 64% of total sales. U.S. revenues fell 1%, to $2.4 billion.
The agricultural and nutritional business led overall sales growth, up 21%, to $1.1 billion. Pretax operating losses from the division narrowed from $154 million, to $96 million. Coatings and color technologies pretax operating income fell 14%, to $204 million, excluding a $43-million insurance recovery last year. Automotive OEM growth overseas offset weak U.S. automotive sales growth, DuPont says. The electronic and communications technologies segment reported pre-tax operating income up 5%, to $935 million, because of 16% revenue growth, fixed cost controls, and a strong packaging graphics market, the company says. Pre-tax operating income from the performance materials segment rose 16%, to $196 million, helped by broad-based strength across its product line. Safety and protection pre-tax operating income increased 9%, to $313 million.
Earnings results from Lyondell Chemical’s chemical operations were down because of mixed pricing, higher incentive-related costs, and higher raw material costs.
Lyondell’s inorganic chemicals business is not listed in the CW100 table including results from diversified companies because that business was sold to National Titanium Dioxide Co. (Cristal; Yanbu, Saudi Arabia) last year (CW, May 23, 2007, p. 11). Basell bought Lyondell in November, and renamed the firm BasellLyondell (CW, Nov. 7, 2007, p. 7).
GE has been dropped from the CW100 because the company’s plastics unit was acquired by Sabic in September (CW, Sept. 5/12, 2007, p. 8).
Third-quarter earnings were also mixed among U.S. specialty chemical companies mostly because of improved overseas demand and, offset by charges and rising raw material costs. Rohm and Haas’s (R&H) earnings dropped due to charges.
R&H reported net income from continuing operations of 61 cts/share including restructuring and pension-related charges, and 87 cts/share excluding those charges. The consensus of analysts‚ estimates as reported by First Call (Boston) was for 86 cts/share.
R&H’s diversified portfolio and global presence “helped us to capitalize on strong demand for our products outside the U.S. this quarter,” says Raj Gupta, chairman, president and CEO. Sales were up in all regions except North America.
Higher selling prices and strong demand lifted third-quarter earnings of fertilizer producers including CF Industries Holdings (Deerfield, IL), Terra Industries, and Compass Minerals.
This article and the accompanying table reflect U.S.-traded companies reporting results in quarters ending July, August, and September. Figures reflect income from all business units within these companies and are not limited to chemical-related operations.
This article is reprinted with permission from Chemical Week Magazine.