Business
Chemical earnings up, but still weak Although profits at major chemical companies soared 24% from last year, they were down slightly from the first quarter of 1981 William J. Storck and William F. Fallwell C&EN, New York
Chemicals in the second quarter looked good on the surface. Earnings at major U.S. chemical companies were up 24% from second-quarter 1980. Chemical earnings, excepting petrochemical earnings at oil com panies, improved, as did chemical profits at the more diversified com panies with an interest in chemi cals. However, in spite of a big earnings
increase on a year-to-year basis for the 40 largest U.S. chemical com panies, their performance on a quar ter-to-quarter basis is not so good. Earnings for the 40 companies were actually down about 1% from the first quarter of 1981. This is unusual be cause second-quarter earnings are usually higher than those in the first quarter, and the drop this year indi cates a certain amount of weakness in the chemical economy through the first half. In fact, the quarter-to-quarter change this year is probably more significant than the change from the second quarter of 1980, which was much depressed as chemicals slid into last year's recession. What second-quarter performance really means is that the chemical in dustry recovery from the 1980 reces sion has hit a plateau. Although fi nancial results just out from chemical producers are the proof, they aren't
all that surprising. Ever since early spring, new orders have been soft and price rises increasingly in trouble. Interim government statistics have borne this out, showing flat ship ments and production, gradually ris ing inventories, and a reduced rate of price inflation. Behind this pause is the same problem afflicting a great many U.S. industries: super-expensive credit. With interest rates close to all-time records, big-ticket products simply don't sell very easily—particularly automobiles and new houses, which use large quantities of chemicals. Even with its many specialty product lines, the chemical industry cannot escape some damage from pervasive weakness in the durables part of the general economy. At the moment, industry thinking has changed reluctantly on the out look for the rest of 1981. Whereas the conventional wisdom six months ago
Chemical industry leaders for second-quarter 1980 . . . Earnings*
Sal·· Rank
$ Millions
Rank 1980
1 2 3 4 5 β 7 8 9 10
$3929.0 3066.9 2674.9 1865.0 1687.1 1585.0 1002.0 900.0 892.9 828.5
1 2 3 5 4 6 8 7 9 10
Du Pont Dow Chemical Union Carbide Monsanto W.R.Grace Allied Corp. Celanese American Cyanamid PPG Industries B.F.Goodrich
Profitability
$ Millions
Rank 1980
$262.0 193.4 160.0 99.4 93.8 87.0 64.0 57.6 55.8 43.3
1 3 2 4 20 5 9 6 7 8
$ Millions
Rank 1980
$466.0 371.4 288.9 269.8 182.5 171.0 142.5 116.5 113.5 111.0
1 3 2 4 6 7 5 9 8 11
Du Pont Union Carbide Dow Chemical W. R. Grace Monsanto Allied Corp. PPG Industries Texasgulf Diamond Shamrock Freeport-McMoRan
Earnings as % of s a l · *
Freeport-McMoR an Texasgulf Great Lakes Chemical International Flavors First Mississippi Nalco PetroIHe Lubrlzol Malllnckrodt Air Products
20.8% 20.7 13.6 12.6 12.5 11.9 10.0 8.4 8.0 7.2
Rank 1980
1 2 3 4 9 6 8 5 9 11
. . . and for first-half 1981 Earnings 8
Sat·» Rank
$ Millions
Rank 1980
1 2 3 4 5 6 7 8 9 0
$7606.0 5963.8 5314.5 3756.0 3173.8 3167.0 1913.0 1787.0 1700.0 1623.8
1 2 3 4 5 6 8 7 9 11
Du Pont Dow Chemical Union Carbide Monsanto W.R.Grace Allied Corp. Celanese American Cyanamid PPG Industries Diamond Shamrock
Du Pont Union Carbide Dow Chemical Monsanto W. R. Grace Allied Corp. Texasgulf PPG Industries Diamond Shamrock Staufffer Chemical
a After taxes. Not·: For 40 chemical companies listed on page 12.
10
C&EN Aug. 17, 1981
Profitability Earnings as % of salas
Texasgulf Freeport-McMoRan Great Lakes Chemical International Flavors Nalco Stauffer Chemical Petrollte First Mississippi Lubrizol Williams Cos.
22.3% 20.6 14.4 12.4 12.1 11.0 10.0 8.7 8.4 8.3
Rank 1980
1 2 3 4 7 11 9 10 5 15
Chemical industry 1981 second-quarter results
• Sales up 15% from year ago
Sales
Earnings
% change from year-earlier quarter 40
% change from year-earlier quarter 40 30
• Earnings jumped 24%
30 20
• Profit margins rose 10
20
• Production was up 0
• Price increases slowed
10
-10 -20 * 1979
1981
1980
1979
1980
1981
Profit margins
Production
Prices
After-tax earnings as % of sales 8
% change from year-earlier quarter
% change from year-earlier quarter 201
10
7
10
16
5
12
6
8Ι
0 5
4
.1
πI
-101 1979
1980
1981
1979
1981
1980
1979
1980
1981
Chemical sales this year likely will top $100 billion, a 15% increase, whereas earnings will rise only 10%; profit margins will fall to 1977 levels Annual sales
Annual earnings
Annual profit margins
$ Billions 120
$ Billions 7|
After tax earnings as % of sales 8
100
6 7
5
80
4 6
60 3 40
2
20
1
0 1971
V
5
73
75
77
79
81 e
Ο 971
73
75
77
79
81 e
Ο 1971
73
75
77
79
81 α
a C&EN estimates. Note: All sales, earnings, and profit margin data are based on the combined performance of the 40 chemical companies listed on page 12.
Aug. 17, 1981 C&EN
11
Business Earnings gain for large companies outpaced that for smaller firms in second quarter SECOND-QUARTER 1981 Sales Earnings Change from 1980 ($ millions) Earnings Sales
Du Pont Dow Chemicald Union Carbide9 Monsanto W. R. Grace
5.4 3.1 3.9 5.3 1.3
3,167.0 1,913.0 1,787.0 1,700.0 1,608.9
171.0 77.0 89.3 116.5 29.0
15 16 7 10 7
21 26 26 23 -4
7.1 4.7 6.6 6.1 6.0
7.2 4.3 8.5 5.8 5.6
1,623.8 1,380.0 1,073.9 1,024.1 1,066.3
113.5 69.0 89.5 58.2 61.3
11 11 2 13 11
8 14 9 7 25
-6 -2 4 16 -10
5.7 5.2 7.2 6.1 3.1
6.3 5.5 7.6 5.6 4.0
1,083.4 878.6 800.6 1,006.5 659.1
76.8 44.1 64.9 111.0 16.2
13 nc 9 7 17
-16 -3 6 24 -25
14 8 16 19 -1
233 17 -3 2586 -32
1.5 4.1 20.7 2.2 8.4
0.6 3.8 24.6 0.1 12.1
622.9 603.7 553.6 493.1 465.1
7.5 15.3 142.5 9.5 39.1
16 4 6 10 nc
11 -34 -29 116 -33
43.3 8.8 19.6 17.1 10.2
33 21 9 44 17
2 16 11 94 13
20.8 5.0 11.9 12.5 8.0
27.3 5.2 11.7 9.3 7.4
432.8 350.1 320.9 201.3 248.7
89.0 17.0 38.7 17.5 20.3
35 19 8 47 12
4 1 14 32 13
120.3 109.0 84.7 74.9 66.1
15.1 7.2 3.7 7.5 2.4
-3 6 12 16 8
-21 13 32 9 14
12.6 6.6 4.4 10.0 3.6
15.5 6.2 3.7 10.7 3.4
243.7 218.6 162.8 145.8 126.0
30.2 16.4 6.7 14.5 4.2
-1 4 13 18 3
-19 12 52 20 8
56.0 55.7 52.1 34.5 28.6
1.9 2.6 3.5 4.7 1.2
49 8 39 30 3
31 -57 150 19 -43
3.4 4.7 6.7 13.6 4.0
3.8 11.6 3.7 14.7 7.3
105.6 112.3 92.0 69.3 54.7
3.0 5.6 4.4 10.0 1.3
37 10 30 15 1
51 -54 110 8 -62
$23,671.9 $2,902.5 $26,574.4
$1371.7 $249.6 $1621.3
$46,586.3 $5,623.0 $52,209.3
$2765.9 $492.7 $3258.6
6.8% 5.2 7.2 5.0 5.9
5.1% 6.8 6.3 1.5 5.4
87.0 41.0 42.2 64.0 20.6
16 25 8 19 10
19 64 29 61 106
5.5 4.1 4.7 7.2 2.5
786.3 712.0 578.2 545.4 544.6
55.8 33.5 37.9 33.4 32.9
6 14 1 17 12
5 22 -23 24 21
International Minerals Ethyl Corp.h Air Products Staufffer Chemical Witco Chemical
520.4 453.4 387.6 377.2 335.5
29.8 23.6 28.0 23.1 10.3
4 3 9 6 20
Akzona Pennwalt Texasgulf1 Reichhold Chemicals1 Lubrizol
314.0 308.7 278.3 254.3 240.9
4.8 12.7 57.6 5.5 20.2
Freeport-McMoRan Thiokol Nalco Chemical First Mississippi Mallinckrodt
208.2 177.6 164.1 137.1 127.4
International Flavors Liquid Airk H. B. Fuller Petrolite Crompton & Knowles
1,585.0 1,002.0 900.0 892.9 828.5
Diamond Shamrock Hercules Williams Cos. Rohm & Haas9 Olin
Total 20 largest companies Total 20 other companies Grand total
14% 23% 15%
28% 5% 24%
5.8% 8.6% 6.1%
5.2% 10.1% 5.7%
8% 12 8 11 8
12% -28 nc 44 21
$ 466.0 288.9 371.4 269.8 182.5
51% -7 29 304 18
$ 262.0 160.0 193.4 93.8 99.4
Stepan Chemical Loctite Essex Chemical Great Lakes Chemical Philip A. Hunt
FIRST-HALF 1981 Change from 1980 Earnings Sales Sales Earnings ($ millions)
$ 7,606.0 5,963.8 5,314.5 3,756.0 3,173.8
14% 22 13 20 9
$ 3,929.0 3,066.9 2,674.9 1,865.0 1,687.1
Allied Corp. Celanese American Cyanamid PPG Industries B. F. Goodrich'
|
Profit margin* 1981 1980
10% 15% 10%
7% -9% 4%
a After-tax income as percentage of sales, b Fully diluted before nonrecurring items and extraordinary charges for operations, c As of July 31. d Excludes nonrecurring gain of $21 million in second-quarter 1981. e Excludes $217.3 million nonrecurring gain in first-quarter 1980. f Excludes nonrecurring gain of $18 million in first-half 1981. g Excludes $13.4 million charge in
called for a slow first half followed by a marked pickup in the second, the consensus now is that the entire year could turn out in the doldrums. Certainly, no fresh wind has blown in for the third quarter. This lag will have some important consequences. Most generally, the chemical industry's new business cycle, starting with expansion, is be12
C&EN Aug. 17, 1981
hind schedule by at least half a year. That will upset a lot of fairly rosy earnings forecasts for 1981. It also will keep the brakes on capital spending, the chemical industry's most important use of free-standing funds, despite the new incentives in legislation from Washington. It will not, apparently, affect the industry's big planned increase this year in R&D.
Combined earnings for the 40 companies were up 24% in the second quarter from a year earlier to $1.62 billion. Combined sales for the 40 companies topped $26.57 billion in the quarter, a gain of 15% from the same period a year ago. Profit margins rose to an average 6.1% from 5.7% last year. For the second straight quarter, the
STOCK MARKET DATA 0 FIRST-HALF 1981 Profit margin* 1981 1980
Earnings per share 0
12-MONTH RUNNING DATA Change from 1980 Sales Earnings
Profit margin* 1981 1980
5.4% 5.7 6.3 4.8 4.9
6.6% 7.8 6.7 4.5 4.8
Stock price Recent 12 months High Low
2nd qtr
Recent 12 months
July 31
$1.67 0.84 2.86 2.32 2.05
$5.06 3.68 10.43 8.98 6.60
451/2 31 1 / 4 561/4 74 481/8
56 39 62% 87% 63%
53% 631/2
Pr|ce
«arnings ratio July 31
Annual indicated dividend
36 30% 43 501/4 41%
9 8 5 12 7
$2.40 1.80 3.40 3.80 2.60
46% 48% 26 32% 20%
7 7 8 6 6
2.40 3.80 1.60 2.36 1.56
4.5 6.0 5.3 5.3 6.4
Dividend yield, % of price
6.2% 4.8 7.0 7.2 5.8
6.0% 7.5 7.5 5.6 5.1
7% 10 7 9 12
5.4 4.0 5.0 6.9 1.8
5.1 3.7 4.2 6.1 2.0
12 11 8 7 5
46 10 15 12 6
5.6 3.8 5.0 6.9 1.9
4.3 3.9 4.7 6.6 1.9
2.40 2.39 0.88 1.91 1.03
9.^4 8.73 3.88 6.94 4.22
44V 2 241/2
61% 691/4 36% 581/4 28%
7.0 5.0 8.3 5.7 5.7
7.2 4.8 7.8 6.0 5.1
17 5 7 10 7
-8 nc 11 2 14
5.9 4.9 6.5 5.4 4.4
7.4 5.2 6.3 5.9 4.1
1.00 0.76 1.27 3.14 1.37
3.42 2.91 5.18 8.32 3.63
34V2 24Ve 287e 651/4 23%
39% 26% 49% 71% 27
27% 18 25% 45% 17%
10 8 6 9 7
1.68 1.32 1.20 2.80 1.20
4.9 5.5 4.2 4.3 5.1
7.1 5.0 8.1 11.0 2.5
9.5 5.2 8.3 9.5 3.8
15 -1 10 9 18
7 -7 5 3 -17
7.7 5.1 7.8 8.1 2.8
8.3 5.4 8.2 8.5 4.0
1.09 1.19 0.98 0.52 1.05
6.13 4.36 4.23 3.25 3.69
42V2 267e 371/4 24 28 %
66% 36% 591/4 27% 33%
38% 25% 36% 17% 26
7 6 9 7 10
2.60 1.50 0.80 1.32 1.60
6.1 5.6 2.1 5.5 5.7
1.2 2.5 22.3 1.9 8.4
1.3 4.0 33.7 1.0 12.5
6 5 20 4 7
-68 -11 48 159 -16
0.5 3.4 27.9 2.3 10.0
2.4 4.1 22.7 0.9 12.7
0.39 1.23 1.60 0.69 0.51
0.46 3.91 7.32 2.64 4.21
13% 28% 531/8 13% 261/2
151/2 36 577/8 16 41%
10 25% 191/4 11 24%
30 8 7 5 6
0.80 2.20 1.00 0.48 1.08
5.8 7.8 1.9 3.5
20.6 4.8 12.1 8.7 8.2
26.8 5.8 11.4 9.7 8.2
39 23 6 47 13
40 -22 17 41 11
21.2 4.3 12.1 8.3 8.1
21.1 6.7 11.0 8.7 8.2
0.63 0.76 0.97 0.80 0.69
3.69 2.67 3.84 1.65 3.53
321/2 31 7 / 8 49% 18% 33%
40% 39 581/4 30% 41%
29% 25% 381/8 151/4 23%
9 12 13 11 10
0.60 1.10 2.00 0.24 1.00
1.8 3.5 4.8 1.3 3.0
12.4 7.5 4.1 10.0 3.3
15.2 6.9 3.0 9.8 3.2
1 9 13 25 2
-14 4 45 43 -9
12.6 6.8 3.9 9.9 3.1
14.8 7.1 3.0 8.7 3.6
0.42 0.68 0.81 0.63 0.72
1.99 2.29 2.65 3.97 3.02
19% 221/4 24% 33% 17%
27% 341/2 24% 44% 18%
17% 221/4 11% 31 11%
12 10 9 9 8
0.92 1.60 0.48 0.80 0.96
4.8 7.2 2.0 2.4 5.4
2.8 5.0 4.8 14.4 2.4
2.6 12.0 3.0 15.3 6.4
23 7 26 9 -1
67 -60 103 3 -74
3.5 4.9 4.6 14.6 1.9
2.6 13.0 2.8 15.4 7.1
1.00 0.26 0.94 0.65 0.20
2.51 1.05 2.58 2.76 0.34
34% 241/4 20 47% 9%
43% 38 201/4 581/2 131/2
16% 23 11% 39 8%
14 23 8 17 45
1.00 0.56 0.80 0.44 0.40
2.9 2.3 4.0 0.9 4.3
5.9% 9.0% 6.2%
6.1% 11.1% 7.0%
9% 13% 9%
-13% -19 nc 17 15
nc 15% 2%
5.4% 9.2% 5.8%
3oy4
5.3% 5.8
6.0
I
5.1 5.4
4-1
!
i
5.9% 9.0% 6.2%
second-quarter 1981 and $7.6 million nonrecurring gain in first-quarter 1981. h Excludes $6.8 million charge in second-quarter 1980 and nonrecurring gain of $7.3 million in first-quarter 1980. i Excludes $18.6 million nonrecurring gain in first-half 1981. | Excludes $2.4 million charge in second-quarter 1981. k Excludes $2 million gain in second-quarter 1980. nc = no change.
larger companies outperformed the smaller companies. The 20 biggest companies on the list had an earnings gain of 28% to $1.37 billion. This increase came on a sales gain of just 14% to $23.67 billion. By way of contrast, the smaller companies on the list had a smaller earnings gain on a larger sales gain for the quarter. Earnings at the 20
smaller companies totaled nearly $250 million, a 5% gain from the second quarter last year. However, sales at the smaller companies increased 23% to a total of $2.90 billion. The huge increase in earnings at the 40 chemical companies in the second quarter made the year-to-year change for the first half positive. After being off about 8% in the first quarter,
chemical company earnings improved an average of 4% for the first half. Earnings for the 40 companies in the first six months totaled $3.26 billion, compared with $3.12 billion in the first half of 1980. Sales for the 40 companies increased a much faster 10% to $52.21 billion in the first six months this year. The result was that profit margins were driven down to an Aug. 17, 1981 C&EN
13
Business Earnings are up at most chemical-producing oil and natural gas companies FIRST-HALF 198'I
SECOND-QUARTER 1981 Sales
|
Exxon Mobilb Texacob Standard Oil of California Standard Oil (Ind.)
8% 4 3 3 11
$27,469.0 16,565.0 14,799.0 10,979.0 8,139.2
$1825.0 700.0 555.7 616.0 552.8
1
Gulf Oil Atlantic Richfield Shell Oil Conoco Phillips Petroleum
10 8 16 5 14
7,200.0 6,968.0 5,554.0 4,900.0 4,070.0
311.0 380.1 410.0 158.7 229.8
6 23 13 4 26
|
Sun Co.b Tenneco Getty Oil Occidental Petroleum Standard Oil (Ohio)
3 12 2 21 4
3,900.0 3,776.0 3,216.5 3,127.9 2,907.9
163.0 203.0 205.0 128.2 478.7
Union Oil b Ashland Oil Cities Service5 El Paso Kerr-McGee
10 14 7 14 14
2,775.8 2,456.0 2,265.3 1,007.0 890.8
183.5 13.3 77.5 37.8 51.4
1 I
Earnings
Change from 1980
% Chemical sales
($ millions)
Profit margin*
Sales
Earnings
1981
1980
5% 8 18 3 13
77% 2 10 15
6.6% 4.2 3.8 5.6 6.8
3.9% 4.5 4.0 5.0 6.8
-34 -13 1 -36 7
4.3 5.5 7.4 3.2 5.7
30 18 22 4 2
-33 9 -16 -20 6
1 19 23 12 4
-6 -71 -28 62 4
Change from 1980 Sales
7% 10 17 9 17
$57,792.0 33,709.0 30,258.4 22,967.0 15,992.3
$3425.0 1340.0 1213.7 1282.0 929.5
6.9 7.7 8.3 5.3 6.7
15,074.0 14,100.4 10,967.0 10,300.0 8,300.0
614.0 726.6 771.0 409.6 500.6
4 27 13 14 26
4.2 5.4 6.4 4.1 16.5
8.2 5.8 9.2 5.4 15.9
7,900.0 7,585.0 6,511.2 6,507.5 6,027.2
283.0 397.0 435.2 387.6 999.1
30 16 33 3 10
6.6 0.5 3.4 3.8 5.8
7.1 2.3 5.8 2.6 5.8
5,442.3 4,607.3 4,564.5 2,008.0 1,806.9
338.0 20.5 135.2 68.7 94.8
6 14 13 16 11
1
.3
· After-tax income as percentage of sales. b Excludes major nonrecurring earnings: Mobil—$459 million first-quarter 1980; Texaco—$402 million in first-quarter 1980; Sun--$135 million in second-quarter 1981; Union Oil—$24.4 million in second-quarter 1981; Cities Service—$13.0 million in second-quarter 1981.
Petrochemical earnings are still down If overall chemical earnings are finally beginning to pull up, petrochemical earnings at oil and natural gas companies are doing their usual thing in lagging behind. The best that can be said is that petrochemicals didn't do as badly as in the previous three quarters. At a few of the better-performing petrochemical operations, the second quarter brought signs of a turnaround. But for most firms, news from their chemical units was not good. For six major U.S. oil companies supplying after-tax data, petrochemical earnings fell 18% in the second quarter from a year ago. This is less of a drop than the 5 5 % decline for these companies in the first quarter (C&EN, May 11, page 17). As a result, first-half 1981
$ Militons
Conoco Exxon Mobil Shell Oil Standard Oil (Ind.) Texaco TOTAL
14
Sales Earnings ($ millions)
C&EN Aug. 17, 1981
1981
$-1.2 96.0 27.0 15.0 51.7 26.3 $214.8
earnings for the group were down 3 8 % from first-half 1980. As in first-quarter reports, a large number of companies had things to say about chemical performance. Some comments have turned hopeful, but most are still negative. Shell Oil president John F. Bookout could be speaking for many other companies when he says, "We have not seen the turnaround in chemical product results which we had expected by this time. Significant improvement in this sector is highly dependent on the economy, particularly automobiles and housing, and we remain hopeful that business conditions for chemical products will improve later in the year." At Exxon, the largest petrochemical
AFTER-TAX EARNINGS Second quarter 1980 % Chang· 1981
$ 18.2 107.0 26.0 54.0 46.1 9.1 $260.4
Deficit -10% 3 -72 12 190 -18%
$-3.8 157.0 53.0 21.0 91.1 48.7 $367.0
First half 1980
$ 43.7 269.0 62.0 77.0 105.3 39.2 $596.2
% chang·
Deficit -42% -14 -73 -14 24 -38%
producer, chairman C. C. Garvin Jr. fills in a few numbers behind the company's continuing profits drop. Although dollar sales in the first half of 1981 gained 3 % from a year ago, physical sales volume was down 5% worldwide. Profit margins were lower for most product lines, influenced by a combination of excess plant capacity and rising costs. Some chemical units at oil companies are still in the red. For example, Conoco sustained a $1.2 million loss in the second quarter in contrast to an $18.2 million profit a year ago. For the first half, Conoco had a $3.8 million loss compared to a $43.7 million profit in 1980. The problem is caused by higher feedstock costs, sharply lower physical sales volume for petrochemicals, and competitive price pressures in plastics. However, a few chemical operations in the oil industry turned in profit gains in the second quarter amid general optimism from management. For example, Standard Oil (Ind.) registered an after-tax profit pickup in chemicals of 12% in the second quarter from a year ago. Chairman John E. Swearingen comments that prices in most chemical lines have remained strong enough to preserve profit margins despite declining demand in some lines.
FIRST-HALF 1981 Change from 1980
STOCK MARKET DATA Stock price
Earnings per share Profit margin*
Earnings
1981
1980
2nd qtr
Recent 12 months
16% -13 10 10 -13
5.9% 4.0 4.0 5.6 5.8
5.5% 5.0 4.3 5.5 7.8
$2.11 1.65 2.09 1.80 1.90
$7.08 6.18 8.77 7.49 6.10
35 30%
-29 -16 -1 -29 0
4.1 5.2 7.0 4.0 6.0
5.9 7.8 8.1 6.4 7.6
1.59 1.51 1.33 1.54 1.51
-43 9 -7 -12 11
3.6 5.2 6.7 6.0 16.6
8.2 5.6 9.6 6.9 16.4
4 -78 -51 30 -2
6.2 0.4 3.0 3.4 5.3
6.8 2.3 6.9 3.1 5.9
July 31
Recent 12 months High Low
Price-earnings ratio July 31
Annual indicated dividend
Dividend yield, % of price
60%
44% 44% 54% 51% 99%
32% 27% 33% 35% 49
5 5 4 6 10
$3.00 2.00 2.80 2.40 2.60
8.6 6.5 7.7 5.6 4.3
5.44 5.61 4.96 8.02 7.04
39% 50 45%
52% 74% 65%
91 y 4 43 1 / 2
91 %
30% 40% 34 47% 34%
7 9 9 11 6
2.80 2.20 1.80 2.60 2.20
7.1 4.4 3.9 2.8 5.1
1.30 1.50 2.49 1.47 1.94
4.50 5.82 10.19 7.59 7.74
40% 39 72% 27% 51
59% 58%
31 %
9 7 7 4 7
2,10 2.60 2.40 2.50 2.40
5.2 6.7 3.3 9.1 4.7
1.06 0.14 0.93 0.79 1.98
3.68 2.93 4.02 2.61 6.94
41 y 4
36 54 26% 77%
56% 45% 62% 29% 93
11 12 13 10 11
0.80 2.40 1.60 1.48 2.00
1.9 6.7 3.0 5.6 2.6
36 1 / 4 42 1 / 2
62%
108 1 / 4
39% 91%
36% 59 24% 42% 28 29% 31 %
19% 61%
average of 6.2% from 7.0% for the first last year. Fibers contributed 35% of half of 1980. the company's earnings in the second For the 20 larger companies, sales three-month period this year. Fiber increased 10% over last year's first sales (worldwide) at Du Pont were half to $46.59 billion. Earnings in- $1.31 billion, an increase of 20% from creased 7% to $2.77 billion. Profit second-quarter 1980. margins at the 20 larger companies Monsanto's fiber operations imfell slightly to 5.9% in the first half of proved in the second quarter from a 1981 from 6.1% last year. year ago, although they were not so The smaller companies on the list good as they had been in the first fared worse, however. While sales quarter this year. Monsanto's fiber were increasing 15% to $5.62 billion, sales in the second quarter increased earnings were falling. The 5% increase 11.2% from a year ago to $276.2 milin earnings in the second quarter was lion. not enough to pull the year-to-year Fiber operating income in this change for the 20 smaller companies year's second quarter was $7.2 milinto the positive numbers after a 12% lion, better by any standards than the decline in the first quarter. $41.4 million loss Monsanto suffered Earnings for this group in the first in the second quarter of 1980. Howhalf were off 9% to almost $493 mil- ever, the $7.2 million operating inlion. The result is a drop in profit come was 58% lower than in this margin to 9.0% in the first half of this year's first quarter. year from 11.1% in the first six For the half, Monsanto fiber sales months of last year. were $547 million, a 9.3% gain from On the plus side, fibers continued the first half of 1980. Operating inthe improvement that they started come for the half was $24.5 million, the fourth quarter of 1980. At Allied compared with a loss of $71.1 million Corp. sales and income from nylon in the first half a year ago. carpet fiber operations were subAt Celanese, fibers also performed stantially higher than in last year's well on a year-to-year basis, and unsecond quarter. like Monsanto, income from fibers in At Du Pont, fiber net income was the second quarter showed good im$93 million in the second quarter, up provement over that of the first. 186% over the $32 million in net inFiber income at Celanese in the come for fibers in the second quarter second quarter was $1.15 per share,
an increase of 161% from secondquarter 1980. And the $1.15 per share was 69% ahead of fiber earnings in the first quarter this year. Much of the improvement at Celanese was contributed by polyester, earnings from which in the second quarter amounted to 35 cents a share compared to a loss of 8 cents a share in the second quarter a year ago. For the first half, Celanese fiber earnings were $1.18 per share, an increase of 118% over last year's first half. Again, polyester added to this; earnings from those operations in the first half improved to 42 cents a share from a loss of 17 cents a share in the first six months last year. While earnings were improving in fibers, some other areas were not so fortunate. One of these in particular was phosphate fertilizers. At Williams Cos., Joseph H. Williams, chairman and chief executive officer says, "Agrico Chemical Co.'s nitrogen product prices and margins were good throughout the second quarter. However, phosphate product prices and margins declined as inventories increased. We are now curtailing phosphate production at two of our plants, which will adversely affect results for the third quarter and the year." Freeport-McMoRan says that Aug. 17, 1981 C&EN
15
Business Earnings also improve at most diversified chemical producers FIRST-HALF 1981
% Chemical sales
1 1
General Electric U.S. Steel Dart & Kraft Eastman Kodak 3M
4% 12 11 23 15
Georgia-Pacific Aluminum Co. of America Borden Northwest Industries FMC
($ millions)
$6950.0 3792.0 2608.2 2417.4 1664.0
$436.0 167.6 116.1 284.5 135.0
13 10 34 7 35
1443.0 1304.6 1208.6 926.9 911.5
Kaiser Aluminum Martin Marietta Esmark Pfizer Merck
13 10 26 14 16
Borg-Warner NL Industries General Tire & Rubberb Uniroyal Eli Lilly
Sales
Earnings
Profit margin* 1981
Ï98Ô
6.5% 4.4 4.5 11.8 8.1
6.5% 3.5 4.5 11.3 10.4
Sales
Earnings
($ millions)
Change from 1980 Sales
$13,040.0 7,191.4 5,010.3 4,722.7 3,246.0
$795.0 438.5 212.6 533.6 277.7
4.6 11.5 3.1 4.6 4.5
2,791.0 2,603.6 2,261.5 1,736.9 1,797.7
107.0 182.6 72.4 118.7 83.4
15 0 -4 29 3
7.7 6.9 3.5 9.2 14.6
8.2 9.1 2.5 9.2 16.4
1,728.0 1,597.7 1,582.0 1,608.1 1,469.6
136.6 100.8 41.3 139.5 220.3
-5 32 17 11 11
4.7 7.8 1.3
3
5.9 11.0 3.5 3.6 12.3
12.4
1,388.3 1,292.9 1,226.7 1,167.9 1,437.2
76.6 135.0 29.2 30.3 201.5
3 27 18 0 9
16 16 4 -3 -29
-18 -13 18 1 24
3.0 7.8 6.6 3.9 4.8
4.2 10.3 5.9 3.7 2.7
964.3 995.4 1,030.9 876.4 1,138.3
12.4 92.2 68.8 21.4 35.7
11 14 -2 -3 -31
19 9 30 11 9
29 18 29 10 191
7.1 11.3 13.2 2.7 2.8
6.5 10.3 13.2 2.8 0.9
826.4 373.2 398.7 368.5 350.8
60.3 37.2 52.4 9.6 7.4
9 4 30 8 9
12% 20 16 13 10
8% 50 16 19 -14
55.0 81.5 40.2 67.1 42.0
21 1 -5 35 4
0 -45 2 112 7
3.8 6.3 3.3 7.2 4.6
893.6 880.2 848.1 810.3 744.3
68.5 61.1 29.7 74.8 108.5
-11 37 17 14 10
-17 4 62 15 -2
24 26 19 27 20
712.3 687.2 658.2 626.4 624.6
42.0 75.4 22.7 22.7 76.7
6 35 24 6 4
33 90 229
Koppers Upjohn National Distillers Emhartb Engelhardb
30 19 36 16 7
538.4 513.9 522.3 442.8 433.3
16.1 40.0 34.5 17.0 20.6
Cabot Vulcan Materials Big Three Industries Ferro GAF
31 38 30 15 44
417.3 205.2 200.0 189.3 174.1
29.5 23.1 26.3 5.1 4.3
c
c
8% 14 10 11 8
a After-tax earnings as percentage of sales, b Excludes major nonrecurring earnings: General Tire--$4.4 million charge in first-quarter 1981; Emhart—$3.9 million in second-quarter 1980; Engelhard—$5.2 million in second quarter 1981. c Deficit in 1980. na = not available.
phosphate markets in the U.S. and abroad weakened late in the first half. The combined fallout effects of some overproduction and a strong U.S. dollar, high interest rates, and weaker grain prices which curtailed farmers' net income and ability to finance and buy the anticipated level of fertilizer product, created some excess inventory. Phosphate fertilizer prices have declined to generally unprofitable levels for most manufacturers. Many of the chemical companies attributed their improved earnings to increased volume and better pricing in U.S. markets. For instance, industry leader Du Pont says that net income from U.S. operations in the second quarter was $220 million, a 121% increase over the second quarter last year. The improvement, the company says, was due primarily to 16
Sales
SECOND-QUARTER 1981 Earnings Change from 1980
C&EN Auq. 17, 1981
higher volume, moderation in the rate of increase in the price of raw materials and energy, and increases in selling prices. Although many companies were saying nice things about the U.S. chemical business, more found problems in foreign operations. It is as if companies are saying that although business was good, it should have been better. Chief among the overseas problems were soft economies and the strengthening dollar against other currencies. Again, Du Pont sounded the theme for many of the companies. Net income from foreign operations at Du Pont was down 44% to $42 million in the second quarter. The company says that international operations were affected by the recession in Europe, economic weakness in Brazil
and Argentina, and strengthening of the dollar against world currencies. Dow Chemical's financial vice president Robert M. Keil, however, says that he had observed an upturn during the spring in economic conditions in most of the countries in which Dow operates. But, he says, business in the Far East was slow in the countries that depend on exports to the U.S. Air Products also noted a continuing slowness in the European economies. But, in the foreign area, it seems to be the strengthening dollar that is giving chemical companies the most trouble. Hercules chairman Alexander F. Giacco says that "continued strengthening of the dollar reduced the foreign earnings contribution by approximately 18 cents a share." Non-U.S. chemical operations also
FIRST-HALF 1981 Change from 1980 Earnings
7% 85 5 23 -14
STOCK MARKET DATA Earnings per share
Profit margin 8 1981 1980
6.1% 6.1 4.2 11.3 8.6
6.2% 3.8 4.4 10.1 10.8
July 31
Recent 12 months
Stock price July 31
$1.92 1.89 2.12 1.77 1.15
$6.87 8.06 7.22 7.78 5.38
61 31 y4 49% 743/4
Recent 12 months High Low
Price-earnings ratio July 31
Annual indicated dividend
Dividend yield, % of price
5.2
541/4
69% 35% 52% 85% 65
51 y2 21 39% 591/4 50%
9 4 7 10 10
3.20 2.00 3.40 3.00 3.00
6.4 6.8 4.0 5.5
4.8
2 -38 3 91 4
3.8 7.0 3.2 6.8 4.6
4.3 11.3 3.0 4.6 4.6
0.51 1.09 1.30 2.18 1.16
2.29 4.78 4.99 6.88 4.03
24% 281/4 28% 47% 31
32% 37% 30 54% 35%
22% 26% 23% 29% 24
11 6 6 7 8
1.20 1.80 2.05 2.68 1.60
6.4 7.2 5.6 5.2
-12 8 61 14 4
7.9 6.3 2.6 8.7 15.0
8.5 7.7 1.9 8.5 15.9
1.54 2.45 2.23 1.00 1.46
5.16 7.84 4.91 3.66 5.68
207e 59% 53 47 921/4
30% 76% 55 54% 103
19% 51% 24 39% 73%
4 8 11 13 16
1.40 2.88 1.84 1.60 2.60
6.7 4.8 3.5 3.4 2.8
14 77
5.0 7.5
9
5.5 10.4 2.4 2.6 14.0
14.1
1.95 1.12 0.93 0.81 1.00
6.25 3.36 3.08 0.37 4.72
491/2 42% 26% 91/8 54%
53% 42% 29% 10% 68%
37% 24% 16% 4% 48%
8 13 9 25 12
2.48 0.80 1.50 0 2.30
5.0 1.9 5.6 0 4.2
-37 -4 -5 -41 7
1.3 9.3 6.7 2.4 3.1
2.3 11.0 6.9 4.0 2.0
0.51 1.33 1.00 1.38 0.76
1.61 5.55 3.90 3.85 na
22% 551/2 25% 32% 19
35% 69 33% 37% 30%
20% 51% 24% 28 18%
14 10 6 8 na
1.40 2.00 2.20 2.40 0.56
6.2 3.6 8.8 7.4 2.9
17 26 29 -18 -8
7.3 9.8 13.1 2.6 2.1
6.9 8.2 13.3 3.5 2.5
0.93 2.00 0.62 0.67 0.25
3.35 6.72 2.33 3.49 0.44
33% 47% 32% 28% 14%
36% 56 38 30% 16%
25% 36% 25 20 9%
10 7 14 8 32
0.92 2.20 0.60 1.20 0.80
2.7 4.6 1.9 4.2 5.6
c c
c c
hurt profits at a number of the more diversified U.S. chemical producers. Among those noting chemical profits damage from abroad are GAF, Emhart, National Distillers, and NL Industries. The chief causes are the same as for basic chemical companies' foreign troubles—poor European markets, especially in durables, and the stronger U.S. dollar. Given these problems and the stagnant character of much of the U.S. economy, the wonder in the second quarter is that many diversified chemical producers did fairly well. One of the main reasons is good performance in agricultural chemicals, in which nonbasic chemical producers have a big stake. Companies reporting better profits in agchems include Esmark, FMC, Northwest Industries (Velsicol), and
Uniroyal. Uniroyal, a considerably improved company after some blood-letting in the past two years, says that agricultural chemicals are its fastest-growing and most profitable product line. However, agricultural chemicals gave problems to a few producers. Kaiser Aluminum & Chemical says that its agricultural chemical results declined from 1980 because of poor weather conditions in several key market states. And Eli Lilly encountered an interruption in growth of its highly successful Treflan herbicide. U.S. sales declined slightly in the first half from a year ago, but the main trouble was in Canada, where sales were crimped because of reduced acreage for rapeseed. As usual, another product area, specialties, levered up profits for
I
I
many diversified chemical producers—for example, General Electric's engineering plastics and Martin Marietta's specialty chemicals. Problems remain for diversified companies making the bulkier basic chemicals. For example, at fast-expanding Georgia-Pacific, the chemical business improved»overall in the second quarter from a year ago. However, chairman Robert E. Flowerree notes that chemicals associated with the company's important polyvinyl chloride and phenol products were weak because of their close tie to the troubled construction industry. And at U.S. Steel, chemical operations, heavy in organic intermediates and commodity plastics, were hit by continuing depressed markets, which hurt volume and worsened a costprice squeeze. D Aug. 17, 1981 C&EN
17
