EARNINGS
NO CLEAR DIRECTION Second-quarter results at chemical firms are up almost as often as they are down
W
HEN THERE IS NO CLEAR
trend among companies, the word that pops into the minds of financial reporters and security analysts is "mixed"— a term that certainly applies to the chemical industry in the second quarter. Of 15 large chemical companies reporting by C&EN press time, six showed increases in earnings from continuing operations, excluding unusual items; eight had lower earnings; and one, Praxair, had no change compared with the same period last year. Even the two largest U.S. chemical companies went in different directions. Dow Chemical's earnings surged 64.4% to $393 million, while DuPont's earnings fell 12.4% to $623 million. DoVs increase came on a 13-5% rise in sales to $8.24 billion, whereas DuPont's earnings declined despite a sales increase of 10% to $7.37 billion. Both companies noted higher costs for the period, but Dov/s costs for the products it sold— plus selling, administration, and general expenses—rose in line with the sales increase. Growth of these costs at DuPont outstripped its sales increase by almost five percentage points. Dow had the highest percentage earnings gain of the companies surveyed, with the second largest seen at Cabot. Cabot's earn-
EUROPEAN
a number of unusual items that it only reports on a pretax basis. Earnings, including the one-time items, totaled just $6.5 million on sales of $503 million. Sales were up 6.7% over the same quarter of last year. The company says operating results continued to be adversely affected by economic weakness and by higher manufacturing and energy costs. Solutia's earnings declined by $25 million in the quarter to give the company a $14 million loss,
ings, excluding one-time items, rose 25.8% to $29.3 million on a 20% sales increase to $468 million. However, the company is not yet out of the woods. Cabot C E O Kennett F. Burnes says, "Competition in the carbon black market SECOND QUARTER is intense, and we are Slightly more earnings declines than increases at major firms experiencing downSALES EARNINGS0 CHANGE FROM 2002 PROFIT MARGIN*3 ward price pressure ($ MILLIONS) SALES EARNINGS 2003 2002 at the same time as Air Products $1,629.9 $123.2 18.6% -12.8% 7.6% 10.3% our raw material Cabot 468.0 29.3 20.0 25.8 6.3 6.0 costs are increasing." Cytec Industries 374.9 6.8 25.4 6.8 18.7 6.1 4.8 Dow Chemical 8,242.0 393.0 13.5 64.4 3.3 Two other comDuPont 7,369.0 623.0 8.5 10.6 10.0 -12.4 panies with doubledigit earnings in3.2 Eastman Chemical 1,481.0 6.2 3.2 47.0 6.8 creases were Cytec Ferro 416.2 1.6 2.9 6.7 1.9 -43.2 Industries and FMC 4.3 FMC Corp. 510.0 21.7 5.7 13.0 4.0 Corp. Cytec's earnGreat Lakes Chemical 3.6 416.7 15.1 2.0 -35.2 5.7 ings increased 18.7% W.R. Grace0 503.4 6.5 6.7 1.3 4.5 -69.3 to $25.4 million as Lubrizol 514.3 5.7 6.8 29.4 1.3 -14.8 sales rose 6.8% to PPG Industries 6.9 2,304.0 159.0 8.0 6.0 7.0 $375 million. T h e Praxair 10.7 1,401.0 150.0 7.2 0.0 11.5 company had gains Rohm and Haas 1,570.0 7.8 5.8 7.1 91.0 -11.7 in pretax profits in Solutia 611.0 -14.0 def 1.9 4.4 nm all of its business a After-tax earnings from continuing operations, excluding significant extraordinary and segments, led by nonrecurring items, b After-tax earnings as a percentage of sales, c Includes unusual growth in specialty charges, def = deficit, nm = not meaningful. materials and building block intermediates of 19% while sales increased 4.4% to $611 and 12%, respectively million. Solutia CEOJohn Hunter says, "Our earnings continued to FMC's earnings increased 13% be adversely impacted by persistto $21.7 million on 5.7% sales ently elevated raw material and growth to $510 million. energy costs and significant overTO. Grace had the largest percapacity in the marketplace."— centage decline of the 15 compaWILLIAM STORCK nies, but its 69.3% drop includes
EARNINGS
More Job Cuts At ICI, DSM Follow Tough Quarter
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lummeting second-quarter earnings have prompted ICI and DSM to initiate significant new rounds of job cuts as part of restructuring efforts they announced earlier this year. ICI, with net earnings of $105 million, down 22% compared with second-quarter 2002, on sales of $2.5 billion, says it will cut 1,400 jobs in addition to the 700 announced in May. DSM, with earnings of $75 million, down 44%, on sales of $1.5 billion, will cut 500 jobs in addition to the 100 it announced three months ago. "The economic outlook remains uncertain," said ICI CEO John McAdam in announcing a restructuring plan that is expected to deliver savings of more than $160 million per year beginning in
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2005. ICI will incur a charge of $372 million for the restructuring program. The company said there would be some unspecified minor divestitures. DSM Chairman Peter Elverding said his firm's third-quarter earnings may be "strongly below" the second quarter, followed by a "clear recovery" in the fourth quarter. DSM said it will cease production at some pharmaceutical and elastomers facilities. Its restructuring program is expected to result in an increased operating profit of at least $84 million per year beginning in 2005. DSM did not release figures on the cost of restructuring. -RICK MULLIN
C & E N / AUGUST h, 2003
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