NEWS OF THE WEEK BUSINESS
EARNINGS CONSTERNATION Sales gains are offset by high feedstock and energy costs But no matter what direction earnings took, sales at most chem ical companies improved nicely. The problem was that the higher sales mostly reflected higher prices due to FIRST QUARTER higher energy and Financial results were mixed at chemical companies feedstock costs. At many firms, none of SALES EARNINGS3 CHANGE FROM 2002 PROFIT MARGINb the sales improvement ($ MILLIONS) SALES EARNINGS 2003 2002 passed through to the 20.2% -4.8% 7.2% 9.1% Air Products $1,578.1 $113.6 bottom line. 0.8 Crompton 649.8 11.9 75.0 1.8 1.1 15.4 Cytec Industries 28.9 69.0 7.9 5.4 367.0 Dow Chemical was 28.2 1.0 Dow Chemical 8,081.0 85.0 37.1 1.1 one of the companies 615.0 14.1 11.4 8.8 9.0 DuPont 7,008.0 that saw earnings rise 16.7 2.3 Eastman Chemical 1,442.0 -1.0 nm def faster than sales, and 10.1 401.8 9.5 92.5 2.4 1.3 Ferro the firm's data put into 9.5 -82.4 0.3 1.7 Great Lakes Chemical 334.0 0.9 perspective what was 10.9 def 1.0 IMC Global 552.1 -16.8 nm happening in the quar 5.6 6.4 Lubrizol 508.2 28.6 8.7 -4.0 -6.1 6.3 2.1 1,147.0 72.0 -16.0 Monsanto ter. Dow^s earnings in 87.0 10.5 -11.2 4.2 5.2 PPG Industries 2,071.0 creased 37.1% to $85 1,337.0 130.0 8.5 2.4 9.7 10.3 Praxair million on a sales in 82.0 16.8 5.1 5.7 Rohm and Haas 1,613.0 3.8 crease of28.2% to $8.1 596.0 -8.0 14.6 nm def 0.8 Solutia billion. However, only a After-tax earnings from continuing operations, excluding significant nonrecurring and extraor seven points of the dinary items, b After-tax earnings as a percentage of sales, def = deficit, nm = not meaningful. 28% improvement in sales came from in creases in volume. The remaining times significant—from the same 21 points represented higher prices. period in 2002. Others have seen At the same time, DoVs cost of earnings fall. For a few, there were making its products rose 33.8%. no positive results, only losses.
F
IRST-QUARTER EARNINGS AT
chemical companies seem to have no direction. Some firms show improvement— some-
Air Products & Chemicals racked up the second highest sales increase for the quarter—20.2% to $1.6 billion—behind Dow's improvement, but its earnings slipped 4.8% to $114 million. CEO John Ε Jones says: "The slowdown in demand across the basic manu facturing industries is affecting our North American merchant gas and performance polymers vol umes. And significandy higher en ergy and raw material costs are impacting our chemicals segment and, to a lesser extent, gases." Two companies, Crompton and Cytec Industries, pulled off large earnings increases on rela tively modest sales improve ments. Crompton scored earn ings of $12 million, up 75% from an admittedly low base last year as sales improved just 0.8% to $650 million. CEO Vincent A. Calarco says, 'We benefited from an increase in unit volume, lower operating costs, and favorable for eign currency translation, while higher raw material costs and lower selling prices in certain businesses were partial offsets." And Cytec's earnings were up 69% to $29 million on a 15.4% sales increase to $367 million. David Lilley the company's CEO, says, "Our momentum from last year has continued into 2003 in spite of the continuing global eco nomic uncertainty" But he cau tions: "There remains considerable uncertainty in the global economy"-WILLIAM STORCK
Celanese. Operating profits were down 16% at Ciba Specialty Chemicals because of cur rency effects; in local currencies, the re sults were up 17%. ast week's spate of first-quarter fi much uncertainty in the global economic Meanwhile, Rhodia's operating profits nancial results from European situation to predict a broader recovery. were down 80%—but at least they were chemical companies failed to give a Bayer, after a "transition year" of restruc positive. Sales from continuing activities clear outlook for 2003. turing in 2002, saw sales from continuing op were up 4%. The company did show a net At BASF, operating profits for the quar erations increase by 4%. The company's pre loss for the quarter. Rhodia's results were published for its annual meeting in Paris. ter were up 15% on a 7% increase in sales. liminary figures also indicate that its CEO Jean-Pierre Tirouf let kept his job at operating profit for the period will exceed Net profits were off by 21%, primarily be the meeting after two-thirds of sharehold that of first-quarter 2002. cause of high tax-related charges. Chair man Jurgen F. Strube cautioned that, de Also reporting gains in operating profits ers rejected a resolution that he step down.-PATRICIA SHORT spite the good quarter, there is still too were DSM, Merck KGaA, Solvay, and
EARNINGS
Mixed Picture For European Firms
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C & E N / MAY 5, 2003
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