News of the Week
FIRST QUARTER CHEMICAL EARNINGS SLUGGISH The first quarter of 1981 is shaping up for the chemical industry as a period of waiting, at best. It now looks as though earnings for U.S. chemical companies probably will be flat or perhaps down from their levels of a year ago. Most of the chemical companies and companies with chemical operations that so far have reported or predicted first-quarter earnings have said that their profits for the three month period will be lower than in the same period a year ago. Business overseas for these companies particularly seemed to be hurting. But also affecting earnings in the first quarter was advanced buying that took place at the end of the fourth quarter of 1980 in anticipation of January price increases. This advance buying swelled profits in last year's final period, but reduced demand in this year's first quarter. At its annual meeting last week Celanese reported first-quarter earnings of $36 million on sales of $911 million. Earnings for the company were unchanged from last year's first quarter but sales were 8% ahead. Celanese claims that in the first quarter its U.S. business was good, but its foreign business suffered. Chairman John D. Macomber told the meeting of stockholders in Dallas, "For the quarter overall, our U.S. chemicals, U.S. cellulosics, and plastics and specialties businesses all posted good results, and our domestic polyester fibers business continued profitable." But, Macomber continued, "We were hurt by weakness in some overseas fibers markets and by higher worldwide costs for raw materials." U.S. fiber earnings at Celanese increased 70% from last year's first quarter to 68 cents a share, and plastics and specialties earnings climbed 118% to 37 cents a share. Although continuing to be profitable, Celanese's U.S. chemical operations had an earnings decline of 6% to $1.37 per share in the first quarter. However, non-U.S. chemicals and fibers operations at Celanese showed a 17 cent-per-share loss for the first quarter, compared to a profit of 36 cents a share in the first three months last year. In the U.S., Celanese's earnings 4
C&EN April 13, 1981
Macomber: Celanese hurt overseas
show the strengthening of the polyester market. U.S. polyester earnings in the first quarter were 7 cents a share following a loss of 9 cents a share in the first quarter last year. Other chemical companies or companies with significant chemical operations say that first-quarter earnings will fall. B. F. Goodrich chairman John D. Ong says that the
company may report higher firstquarter net income, but earnings from operations will be substantially lower than last year. Goodrich will show a nonrecurring gain of $17.9 million from the exchange of debentures for a new series of convertible preferred stock. So while total earnings including the nonrecurring items may be above the $20.3 million earned in the first quarter last year, Ong says that it appears at this point that earnings "will not exceed the $22.7 million reported in the 1980 fourth quarter." This would mean that net earnings excluding the nonrecurring items would not be more than $4.8 million, which would represent a 75% decrease from the first quarter last year. Other companies predicting lower first-quarter earnings include Akzona, Goodyear, and Sun Co. An exception to lower earnings reports seems to be Olin, which says that it may have a 25% increase in earnings in the first quarter on a sales increase of less than 10%. In the first quarter of 1980, Olin's earnings amounted to $22.1 million on sales of more than $475 million. Olin attributes its improved earnings to its chemicals business and to improved operations. D
CMA proposes modest c *an air law changes Possibly because it is not so affected as some other industries by rules issued under the Clean Air Act, the chemical industry has been slow to make its views known on the law, which is now up for reauthorization. Last week, however, the Chemical Manufacturers Association circulated its modest recommendations for changes to the 11-year-old law, last amended in 1977. Among these was business's universal recommendation that the "increment accounting" system set up under the Prevention of Significant Deterioration (PSD) program to protect the air in so-called "clean-air" areas of the country be streamlined. The trade association claims that strict accounting need take place only in wilderness and national park areas—so-called Class I areas—and that the requirement for best available control technology and adherence to air quality standards
will protect the air in other clean-air areas (those designated Class II and III). Streamlining the PSD program would simplify permitting processes and would eliminate "superfluous and costly delays" in developing projects to meet the country's energy needs and stimulate the U.S. economy, CMA contends. These projects also would be encouraged by eliminating what CMA calls "emission control inequities." New facilities sited either in clean-air or in dirty-air (nonattainment) areas should be required to use best available control technology, CMA says. Facilities locating in nonattainment areas are now required to install "lowest achievable emission rate." The trade association also calls for flexibility in meeting deadlines for state implementation plans, and for returning more control to the states
by allowing them to impose or revise emission limits so long as they make progress toward meeting the national ambient air quality standards. However, the standards must be placed on a firmer scientific footing, CMA says. They should be based on "valid and relevant scientific crite ria," and be subject to "truly inde pendent" review. The association slips in the idea of cost-benefit anal ysis in setting these national air quality standards by calling for con sideration of "unreasonable risk" in establishing the standards. Writing in Regulation, the journal of the American Enterprise Institute, Harvard professor David Harrison Jr. and Resources for the Future fellow Paul R. Portney agree in part with CMA. "It may be time to scrap the uniform national standards alto gether. The threshold concept is in
disrepute, and the prohibition on balancing costs and health effects is a luxury we no longer can afford," they contend. Harrison and Portney recommend that ambient and new source stan dards be based on "a rough balance between the benefits and costs of additional control," that ambient and source standards vary from region to region across the U.S., and that eco nomic incentives become a more in tegral part of air pollution policy. The General Accounting Office is examining economic incentives in one of its six ongoing reviews of issues surrounding the Clean Air Act. In addition to the studies in progress, GAO has released 15 major reports on the air law. Summaries of the 21 re ports can be found in "Clean Air Act: Summary of GAO Reports," April 1, 1981, CED-81-84. D
Democrats' budget plan vins in House panel As expected the House Budget Committee last week rejected Presi dent Reagan's economic program on a party-line vote, preferring instead one developed by the committee's chairman, Rep. James R. Jones (D. -Okla.). The Democrats' program calls for spending nearly $714 billion in fiscal 1982, a figure they claim is $4.3 billion less than Reagan's program would cost. The Administration proposed spending $695 billion in fiscal 1982, but the Democrats contend that the Administration underestimated the rate of inflation and that the real fig ure for its program is almost $718 billion. The Jones plan would allow a net tax cut of slightly more than $30 billion in fiscal 1982, compared to the $51.4 billion cut proposed by Presi dent Reagan and the $50.4 billion tax cut recommended earlier by the House Ways & Means Committee. Nevertheless, one House Republi can, James G. Martin of North Car olina, characterizing himself as a disappointed optimist, is pleased that the Budget Committee has accepted three quarters of the President's program. Martin, a Ph.D. chemist who serves on both the Budget and Ways & Means committees, told the Chemical Manufacturers Association recently that the committee accepted most of Reagan's policy changes. He notes that the restorations amount to saving on a smaller scale some pro grams scheduled for oblivion so that if the political winds change they can be restored. In the tax area, Martin predicts
that if any bill passes, an accelerated capital depreciation scheme for in dustry will be part of it. There is also support, he says, for reducing the 70% tax bracket to 50% right away, for making some further adjustment in the maximum capital gains tax, and for providing a credit at the lower end of the income scale to offset social security tax increases. He adds that there also may be a modest tax in centive for R&D. Debate is now in progress on whether the incentive should be keyed to universities or industries or shared by both. In the regulatory area Martin sees a more positive, productive attitude in this Congress. He predicts that in
Martin: disappointed optimist
reauthorizing the Clean Air Act and the Safe Drinking Water Act, Con gress will move toward more objective standards based on health effects, rather than the present approach of pulling some arbitrary number off the shelf and forcing technology to meet it. D
Squibb antihypertensive gets limited FDA okay E. R. Squibb & Sons says the Food & Drug Administration has given it limited approval to market Capoten (captopril), the company's new drug for treatment of high blood pressure. Use will be limited to "hypertensive patients who, on multidrug regimens, either have failed to respond satis factorily or have developed unac ceptable side effects," Squibb says. Captopril (2-D-methyl-3-mercaptopropanoyl-L-proline) has aroused scientific interest because it's the first orally active drug to act directly on a presumed primary cause of high blood pressure, malfunction of the renin-angiotensin system. Other an tihypertensive drugs work by more general mechanisms: diuresis, vaso dilation, or blockage of the β-receptors of the adrenergic nervous system. Also, captopril is an example of a drug "designed to order" (C&EN, April 4, 1977, page 21). High blood pressure can result from overpro duction of angiotensin II, a powerful vasoconstrictor produced by enzyme action on inert precursors. Squibb scientists earlier had synthesized a nonapeptide that inhibited the en zyme, but that compound was effec tive only when injected. Studies of the enzyme showed that its active site was similar to that of the digestive enzyme carboxypeptidase A, the structure of which was well known. With that knowledge, and concentrating on each suspected site of interaction between enzyme and substrate, the Squibb workers were able to synthesize a new class of in hibitors, one of which—captopril— was effective orally. The drug lowers blood pressure, while avoiding the side effects (nau sea, malaise, dizziness, impotence) of many currently used antihyper tensive drugs. However, captopril has its own side effect, including lowering of the white cell count and protein uria. These effects appear only at el evated dosages; FDA limitations on the drug's use may be relaxed as more experience is gained. D April 13, 1981 C&EN
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