NEWS OF THE WEEK
A MIXED PICTURE
THIRD-QUARTER CHEMICAL RESULTS Weak demand continues to haunt chemical earnings
RECOVERY WATCH: The third quarter
brings few signs of stronger demand
E
ARLY THIRD-QUARTER earnings reports show
that the U.S. chemical industry continues to benefit from lower costs while it looks for signals of an economic recovery. Sales and earnings were generally significantly lower than in the year-ago quarter, but some firms bested analysts’ expectations. DuPont posted earnings of $409 million, down 20.3% from 2008, but the company’s earnings per share of 45 cents beat the analyst consensus by 12 cents. DuPont reported 12% lower sales volumes but said weak sales were countered by lower fixed and variable costs. In a conference call with analysts, DuPont CEO Ellen J. Kullman noted some positive signs in the results, including business units that saw sales rise from the second quarter. “Our coatings and polymer products experienced strong demand on increases in motor vehicle production. Our engineering polymer products experienced an added boost from restocking demands across automotive supply chains,” she said. Kullman said the company is seeing strong demand for titanium dioxide, which she considers an early indicator of recovery for chemicals. Another positive note was DuPont’s 7% increase in sales to China compared with last year. For DuPont’s agriculture and nutrition business, however, sales in the third quarter were down 5% from last year. Kullman blamed the slide on poor planting weather and lower corn acreage in South America. Meanwhile, fertilizer maker Mosaic saw sales and earnings plummet for the second quarter in a row. The company said farmers have been spooked by volatile grain and oilseed prices. Specialty chemical firm Cytec Industries surpassed
SALES EARNINGSa $ MILLIONS
Air Products Cytec Industries DuPont H.B. Fuller Mosaic PPG Industries Stepan
$2,129 740 5,961 315
$246 28 409 24
1,457 3,225 326
101 161 20
CHANGE FROM 2008 SALES EARNINGS
PROFIT MARGINb 2009 2008
-21.6% -23.2 -18.3 -13.0
-9.9% -45.1 -20.3 9.1
11.6% 3.8 6.9 7.6
10.1% 5.3 7.0 6.1
-66.3 -23.7 -24.7
-91.5 -29.1 17.6
6.9 5.0 6.1
27.4 5.4 3.9
a After-tax earnings from continuing operations, excluding significant extraordinary and nonrecurring items. b After-tax earnings as a percentage of sales.
analyst expectations by returning earnings per share of 57 cents, compared with an expected 30 cents. The company reported $740 million in sales and $28 million in earnings. Although these results are down from last year’s third quarter, they represent a sequential gain from the second quarter, when it booked $685 million in revenues and a net loss of $1 million. H.B. Fuller and Stepan both reported increased earnings, though sales were lower than in the third quarter of 2008. The firms also saw sequential improvement in both sales and earnings from the second quarter. H.B. Fuller said increased volumes contributed to the 5% bump in revenue from last quarter, while Stepan attributed its performance to lower raw material costs, cost-control initiatives, and its strong laundry and personal care business. Chemical executives are preparing for a long, slow recovery, says Jefferies & Co. chemical analyst Laurence Alexander. In a note to investors, Alexander writes that the earnings reports have common themes, including “tailwinds from raw materials and cost cutting, strength in Asia (particularly China), and sequential improvements in auto and industrial end market demand.”—MELODY VOITH
PESTICIDES EPA’s Endocrine Disrupter Screening Program will launch this month The Environmental Protection Agency’s long-delayed Endocrine Disrupter Screening Program is expected to get off the ground this month. The agency released two key documents on Oct. 21: One provides a schedule for screening the first batch of chemicals, and another lists 11 assays that will be used to screen the chemicals for their potential to interact with estrogen, androgen, or thyroid pathways. According to the schedule, EPA expects to send out about 750 screening orders to pesticide manufacturers and
importers over the next five months for 67 pesticides or inert ingredients used in pesticides. Screening orders for seven of the chemicals will be issued this month. As part of its approval of the documents, the White House Office of Management & Budget (OMB) advised EPA to accept “other scientifically relevant information” in lieu of data from all or some of the screening assays “to the greatest extent possible.” CropLife America, a trade group that represents pesticide manufacturers, welcomed OMB’s decision. “I am particularly
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gratified that EPA will allow citation of existing data in response to test orders, as well as the use of new computational tools to help prescreen compounds slated for endocrine testing,” CropLife America President and CEO Jay Vroom said in a statement. Congress ordered EPA to develop the Endocrine Disrupter Screening Program in 1996, but the agency just recently completed validation of the screening assays. EPA eventually plans to screen all pesticide chemicals under the program.— BRITT ERICKSON
