CHEMICAL & ENGINEERING
NEWS OF THE WEEK JULY 29, 2002 - EDITED BY JANICE LONG & LOUISA WRAY DALTON
EARNINGS
CHEMICAL FIRMS SEE BETTER QUARTER Profitability increased at many firms as sales growth lagged rise in earnings
F
INANCIAL REPORTS ISSUED
in the past few weeks indicate there may still be life in the chemical industry as many companies show earnings growth in the second quarter over the same period in 2001. In some cases, these increases are significant. However, company executives are still cautious about the shortterm prospects for the industry and the overall economy And the fact that big earnings increases at some firms far outpaced sales growth shows that most of the improvement came from costcutting. This means that when sales do begin to improve significantly, there is plenty of room for even more bottom-line growth. DuPont is a prime example: Earnings from continuing operations, excluding unusual items, rose 65% to $711.0 million, while sales declined 4% to $6.70 billion. However, the company's pretax costs and expenses—including such items as costs of goods sold, selling and general expenses, R&D, interest expense, and employee separation costs—fell 19% from the year-earlier quarter. The company believes that its earnings growth rate will moderate over the second half of this year. At Great Lakes Chemical, CEO Mark P Bulriss says secondquarter results "are all about focus and execution. Our targeted repositioning plan has strengthened Great Lakes' core businesses, while effectively positioning the company to drive profitable growth." Great Lakes achieved HTTP://PUBS.ACS.ORG/CEN
declines outpaced lower feedstock and energy costs by $280 million. Dow notes that prices fell in all segments, compared with second-quarter 2001, with the sharpest decreases in the chemicals and plastics segments. Then there were the big earnings declines. Monsanto's earnings dropped 36% to $268.0 million as sales fell 21% to $1.58 billion. The company's results were hurt by lower sales of its Roundup herbicide; lower Latin American sales, because of a change in the firm's business model in the region; and a change in its royalty system for biotechnology traits. Sales in Monsanto's seeds and genomics segment fell 45% for the quarter to $241 million, and it had a pretax loss of $196 million. The biggest earnings decline among the companies that have reported thus far is at FMC, where earnings dropped 42% to $23.8 million as sales fell 8% to $482.4 million. Sales were down in agricultural products and industrial chemicals, but up in specialty chemicals.-WILLIAM ST0RCK
33% earnings growth to $23.2 million on a 1% sales increase to $408.5 million. More modest earnings growth was seen at industrial gas companies Praxair and Air Products, which had held up fairly well during the recession. Praxair's earnings increased 10% to $139.0 million on sales of $ 1.31 billion, down 1% from the year-earlier period. C E O Dennis H . Reilley says, "We have yet to see a meaningful pickup in demand from our traditional North American manufacturing customers, but are continuing to see continued growth in our health care and electronic segments and in our overseas markets." Air Products' earnings increased 7% to $141.3 million on a 5% deRESULTS cline in sales to $1.37 Earnings increase at many chemical companies billion. CEO John P. 15 SALES EARNINGS3 CHANGE FROM 2001 PROFIT MARGIN Jones III notes strong2000 SALES EARNINGS 2001 ($ MILLIONS) er worldwide demand 9.1% 10.3% -5% 7% Air Products $1,374.0 $141.3 in the company's elec13.7 12.1 -4 10 134.3 Cambrex 16.2 tronics, merchant gas1.9 3.0 -5 49 689.7 Crompton 20.7 es, and performance 9.4 9.7 -1 3 350.9 34.1 Cytec Industries 4.0 3.5 -2 -15 Dow Chemical 7,217.0 252.0 chemicals businesses. 10.6 6.2 -4 65 6,700.0 711.0 DuPont Not every compa4.9 7.8 -8 -42 FMC Corp. 482.4 23.8 ny enjoyed earnings 3.6 1 3.8 -3 319.4 12.0 H.B. Fuller growth in the quarter. 4.5 5.1 473.4 5 -8 W.R. Grace c 21.2 Industry leader Dow Great Lakes Chemical saw earn4.3 5.7 1 33 408.5 23.3 Chemical ings fall 15% to $252.0 0.8 1.1 60 16 588.3 6.7 IMC Global 6.6 4 8 6.8 508.4 34.5 Lubrizol million as sales de20.8 -21 17.0 -36 268.0 Monsanto 1,580.0 clined 2% to $7.22 bil7.0 7.2 2,134.0 -1 -3 150.0 PPG Industries lion. Although the 10.6 9.6 10 1,307.0 139.0 -1 Praxair company had strong a After-tax earnings from continuing operations, excluding significant nonrecurring and gains in volumes and extraordinary items, b After-tax earnings as a percentage of sales, c Earnings include continued productivinonrecurring items. ty improvement, price C & E N / JULY 29, 2002
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