FINANCE
Chemical earnings beat expectations Consumer demand made up for lower prices in the first quarter Sales growth was spotty for the chemical industry in the first quarter of 2016, but most companies beat earnings expectations by successfully adjusting to volatile demand and low prices. As a group, chemical firms in both the U.S. and Europe emphasized their sales of high-margin specialty chemicals and materials aimed at the consumer markets, where demand has been strong. The goal has been to more than make up for lower sales of basic chemicals, where prices have slid because of bottom-of-the-barrel commodity costs. At Dow Chemical, the commodity glut, a down market in agriculture, and the impact of a strong dollar pushed sales for the quarter down 18% compared with last year. Still, earnings grew 6% to $993 million, beating expectations, thanks to Dow’s “integrated specialty chemicals businesses and our broad geographic footprint,” said CEO Andrew N. Liveris in a call with analysts. Liveris pointed out that Dow’s sales grew by 13% in India and 5% in China. Sales even picked up in Europe, where demand has lagged in recent years. Overall, the firm benefited from strong global demand for performance plastics, elastomers, and specialty materials used in construction and automotive manufacturing.
First-quarter results Productivity actions preserved earnings.
Air Products AkzoNobel Ashland Celanese Clariant Dow Chemical DSM DuPont Huntsman W.R. Grace
Sales –8 –4 –8 –3 3 –18 1 –6 –9 –9
Earnings 16 50 –17 2 11 6 nm –2 –10 39
Note: Percent change over first-quarter 2015. nm = not meaningful Source: Companies
The prospect for a speedy merger between Dow and rival DuPont dimmed a bit: Liveris pegged the deal’s closing at sometime in the second half of the year. When the firms announced the deal in December 2015, their goal was the end of the second quarter. DuPont also had a stronger-than-expected quarter. Though overall sales shrank 6% and earnings eroded 2% to just over
$1 billion, the firm’s large agriculture segment performed well in a difficult market. Farmers started their spring season early and planted many more acres than last year with DuPont seed. At both DuPont and DSM, strong sales of nutrition products boosted results. DuPont’s isolated soy protein, probiotics, and yogurt cultures were all winners. DSM’s increase in sales for the quarter was due largely to a turnaround in its human nutrition business. Emerging market demand for paint ingredients and consumer care specialties drove earnings up 11% at Clariant. AkzoNobel reported high demand for paints, pushing first-quarter earnings up 50% compared with last year. Low prices for basic chemicals hindered earnings growth at Huntsman Corp. and Ashland, though productivity improvements helped both firms beat analyst expectations. Huntsman saw prices sink for most products, including polyurethanes and the white pigment titanium dioxide. At Ashland, sales of industrial specialties were down compared with last year, but the company enjoyed vigorous demand for ingredients used in consumer-oriented markets such as pharmaceuticals, hair care, and coatings. Ashland’s retail motor oil and service brand Valvoline saw earnings rise 8%. It plans to spin off that business by the end of the year.—MELODY BOMGARDNER
POLLUTION
CREDIT: SHUTTERSTOCK
PPG will remove lead from paint Joining competitor AkzoNobel, paint giant PPG Industries says it will remove lead from its coatings. Although activists are lauding the move, hundreds of paint brands, particularly in developing countries, continue to contain lead. Numerous lead-containing chemicals have found their way into paints over the years, says Ronald Lewarchik, who runs the coatings consulting firm Chemical Dynamics. Lead carbonate was once added for whiteness and opacity. Lead octoate and lead 2-ethylhexanoate are still used in some countries as driers in oil-based paints. The U.S. banned lead in consumer
paints in 1978, but the metal continues to be allowed in industrial paints. And many developing countries don’t regulate lead at all, according to Occupational Knowledge International, an environmental group that pushed PPG to eliminate lead. PPG says it does not use lead in its consumer paints anywhere in the world. A small number of its nonconsumer products contain lead, and the company says it is committed to reformulating them by 2020.
Most challenging to remove, Lewarchik says, will be lead-based pigments such as lead chromate, which imparts a bright yellow, and lead chromate/oxide cocrystal, also known as chrome orange. Alternative organic pigments are just as durable and weather-resistant as lead-based ones, but they are considerably more expensive. Even companies with the technical wherewithal to remove lead must confront the financial penalty for doing so, Lewarchik notes, recalling his own past attempts to convince employers to drop lead. “They have to be competitive to earn a living,” he says.—MICHAEL MCCOY MAY 2, 2016 | CEN.ACS.ORG | C&EN
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