NEWS OF THE WEEK
CHEMICAL EARNINGS BOUNCE BACK SECOND QUARTER: Companies make
up ground lost during the recession
A
S SECOND-QUARTER financial reports begin
DUPONT
to roll in, chemical industry CEOs are talking like it’s early 2008 again. DuPont’s Ellen J. Kullman kicked off an analyst conference call with this upbeat snapshot: “I’m pleased with our outstanding second-quarter result, with each reporting segment and all regions turning in double-digit top-line growth.” Moreover, DuPont’s earnings of $1.1 billion were up 92.1% compared with the second quarter of 2009 and were equal to the prerecession second quarter of 2008. Sales and earnings for the firm’s electronics segment even surpassed their previous high-water mark, hit in 2008, Kullman pointed out. DuPont’s earnings per share of $1.26 beat analyst consensus expectations by 24 cents. Deutsche Bank chemicals analyst David Begleiter stated in a Kullman report to clients that the strong second-quarter profits were driven by a 21% boost in sales volumes. In contrast, earnings growth in the first quarter was due in large part to price increases. Industrial gas firms Air Products & Chemicals and Praxair benefited from the return of demand for electronics raw materials. Praxair’s earnings of $371 million improved 24.1% compared with last year’s, thanks also to particularly strong growth in South America and Asia.
For companies serving farmers, the second quarter brought sunny days. DuPont’s sales of seeds and its new Rynaxypyr insecticide helped bring 16% sales growth to its agriculture business. Fertilizer maker Mosaic saw earnings shoot up by 166.4% and its profit margin more than double on increased prices. At specialty chemical firm Albemarle, earnings beat last year’s second quarter by 113.2%. The company reported strong volumes for brominated flame retardants and said sales were up significantly in all three of
SECOND-QUARTER CHEMICAL RESULTS
Broad-based increases in sales volumes bring big improvements in earnings SALES EARNINGSa ($ MILLIONS)
Air Products Albemarle Ashland DuPont Mosaic Nalco PPG Industries Praxair
$2,252 592 2,362 8,616
$277 81 148 1,072
1,860 1,087 3,458 2,527
397 57 274 371
CHANGE FROM 2009 SALES EARNINGS
PROFIT MARGINb 2010 2009
14.0% 33.0 16.0 25.6
23.1% 113.2 196.0 92.1
12.3% 13.7 6.3 12.4
11.4% 8.5 2.5 8.1
21.3 19.1 11.0 18.2
166.4 nm 85.1 24.1
21.3 5.2 7.9 14.7
9.7 def 4.3 14.0
a After-tax earnings from continuing operations, excluding significant extraordinary and nonrecurring items. b After-tax earnings as a percentage of sales. def = deficit. nm = not meaningful.
its businesses: polymers, catalysts, and fine chemicals. At paint and chemicals maker PPG Industries, demand continues to lag behind prerecession levels by more than 10%, disclosed PPG CEO Charles E. Bunch. Still, in a report to investors, he wrote that the picture is improving. “Positive momentum in global industrial demand” and “strong demand across the Asia/Pacific and Latin American regions” more than offset weak construction markets in North America and Europe, Bunch said.—MELODY VOITH
CHEMICAL SECURITY Senate panel affirms current rules for safeguarding chemical facilities The Senate Homeland Security & Governmental Affairs Committee last week unanimously approved industry-backed legislation that would retain the current federal program for safeguarding U.S. chemical facilities against a terrorist attack. The panel adopted an amendment by Sen. Susan M. Collins (R-Maine) that would extend the existing Chemical Facility Anti-Terrorism Standards (CFATS) by three years to 2013 and give companies and the Department of Homeland Security time to fully implement the current program, without altering the security
requirements. CFATS expires in October. “This was a vote of confidence in existing chemical security regulations that address the need to protect chemical facilities and their ability to provide products and jobs critical to our nation’s economy,” says Calvin M. Dooley, president and CEO of the American Chemistry Council, an industry trade group. Critics of the CFATS program denounced lawmakers for rejecting a plan approved by the House of Representatives last November that would empower DHS to order the most dangerous facilities to switch to less toxic chemicals or safer
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processes if feasible and cost-effective. “It’s clear that the senators voting for the Collins bill would rather wait for a disaster before they will lift a finger to prevent one,” says Rick Hind, legislative director of Greenpeace, an environmental group. With the midterm elections approaching, however, congressional aides say it is doubtful that chemical security legislation will clear Congress this year. Instead, they say, lawmakers will most likely extend CFATS for another year through the appropriations process and revisit the issue in 2011.—GLENN HESS
