NEWS OF THE WEEK
CHEMICAL EARNINGS: Another big rise in second quarter The U.S. chemical industry continued to pile up profits vigorously in the second quarter of 1984. For 13 major chemical firms that have posted financial statements so far, combined earnings rose 55% over the sefcond quarter last year. Although lower than the huge leaps recorded in fourth-quarter 1983 and first-quarter 1984, the growth in net income is still strong evidence of continued, very solid recovery. Total sales of these companies in the second quarter increased 11%, and profit margins overall jumped to 6.2% from 4.4% last year. With many of the companies in the group reporting record results for both the quarter and the first half of the year, six-month performance was also up smartly. First-half sales for the 13 firms rose 12%. Earnings jumped 66% above those of first-half 1983, boosting profit margins to 6.1% from 4.1%. Prices continued to disappoint chemical producers for the most part, but higher sales volumes com-
bined with maintenance of many of the cost controls implemented over the past few years pushed earnings up. For many firms, the recovery of the agricultural sector—no longer burdened with the government's payment-in-kind program— played a key role in their growth. W. R. Grace, for instance, whose 42% profit increase was the fifth highest in the group, noted that strong second-quarter performance by its agricultural chemical operations was by far the most significant factor in its results. Rohm & Haas, with a 20% jump in earnings, also gave its agricultural chemicals unit most of the credit. Both American Cyanamid and PPG Industries reported better demand for fertilizers and crop protection products. And Monsanto, which turned in a 38% rise in net income, said Roundup and Lasso herbicides—the company's two biggest single profit generators—are "on schedule for another good year." And the improved agricultural business climate also gave a lift to
Stauffer Chemical, which was hurt the most by last year's farming woes. The second quarter also saw some movement in depressed chlor-alkali pricing,. That helped Olin (which continued to lament low prices for ammonia, urea, and swimming pool chemicals) and Pennwalt. After three consecutive robust quarters, chief executives are waxing optimistic. The top officers of Celanese, Monsanto, and Rohm & Haas all predict strong financial performance for the rest of 1984. Grace executives, noting that first-half improvement included all its major business lines, expect full-year results to be some 20 to 30% above those for 1983. Hercules, reaping the profits of its Himont polypropylene joint venture with Montedison and anticipating record operating earnings from its fibers operations, is equally sanguine. "This trend is expected to continue for the remainder of the year," says Hercules chief executive Alexander F. Giacco. "Our forecast is for record earnings in 1984." D
Chemical company earnings rise 55% in this year's second quarter FIRST HALF-1984
SECOND-QUARTER 1984 Earnings 3 Sales ($ millions)
American Cyanamid Celanese Dow Chemical W. R. Grace Hercules Monsanto Olin PPG Industries Pennwalt Petrolite Reichhold Chemicals Rohm & Haas Stauffer Chemical
$1000.0 860.0 2986.0 1741.4 662.0 1801.0 545.3 1100.0 272.5 70.4 219.1 554.8 380.9
$ 57.4 47.0 184.6 57.4 53.4 145.0 33.0 86.1 11.6 6.0 7.9 51.9 14.1
Change from 1983 Sales
11% 3 9 8 16 12 11 18 11 -3 12 6 31
b Profit margin
Earnings 3 Sales ($ millions)
Earnings
1984
1983
34% 124 98 42 44 38 38 37 68 9 20 20 def
5.7% 5.5 6.2 3.3 8.1 8.1 6.1 7.8 4.3 8.5 3.6 9.4 3.7
4.8% $1938.6 1697.0 2.5 3.4 5902.0 3238.7 2.5 1281.0 6.5 3533.0 6.5 1071.8 4.9 2100.0 6.8 530.0 2.8 143.2 7.6 428.4 3.4 1102.9 8.3 799.7 def
a Excludes extraordinary and nonrecurring items, b After-tax income as a percentage of sales, def = deficit.
6
July 23, 1984 C&EN
$113.9 91.0 5266.0 103.4 101.1 320.0 60.2 160.2 21.0 12.0 13.4 108.2 30.1
Change from 1983 Earnings Sales
13% 6 12 9 15 14 11 17 9 -1 15 12 22
62% 237 89 40 57 57 29 69 59 1 25 41 110
Profit margin b 1984 1983
5.9% 4.1% 5.4 1.7 5.2 3.1 3.2 2.5 7.9 5.8 9.1 6.6 5.6 4.8 7.6 5.3 2.7 4.0 8.4 8.3 2.9 3.1 9.8 7.8 3.8 2.2
