The Chemical World This Week
TEXTILE SLOWDOWN HURTING CHEMICAL FIRMS The textile business is hurting and now fiber-producing chemical companies are beginning to show signs of pain as well. Production cutbacks, plant closings, massive layoffs, and price cuts are spreading among fiber producers. These repercussions aren't limited to the U.S. alone. Throughout Europe and in Japan, producers of man-made fibers are starting to feel the effects of the textile slowdown, which started to become acute in the last half of the third quarter. Just how long the textile business will remain in the doldrums is difficult to predict, but textiles are extremely sensitive to general economic conditions and to consumer disposable income. On this basis, textiles are likely to find the going rough at least for the remainder of the year and well into 1975. As a result, chemical companies whose fortunes are tied to the textile industry also will find the going rough. In fact, some of them already have. American Enka, a subsidiary of Akzona, is cutting back production of rayon and polyester filament yarn and will lay off up to 480 employees by early November. The company had laid off about 100 workers earlier this month. Most of these cutbacks will occur at its Enka, N.C., and Lowland, Tenn., plants, although its Central, S.C., plant also will be affected. Noting that layoffs within the U.S. fiber industry are becoming widespread, the company says that "as customers decrease their orders, we have no other choice than to decrease production to keep inventories at an acceptable level." FMC Corp. blames old age and unprovability for closing its fiber division's rayon staple plant at Parkersburg, W.Va. The 40 million lb-per-year plant, which has been operating since 1926, employs about 900 workers. FMC does not say how many of them will be reassigned to other plants. Fiber production is being cut back
Through August, U.S. production W. Hanley says, "Midway through of rayon yarn and monofilaments, the [third] period, worldwide sales of at 125 million lb, was running 11% certain Monsanto Textiles Co. prodbehind last year's pace, according ucts began to fall off." Hardest hit to the Textile Economics Bureau. were acrylics going into the apparel Output had dropped from 11.8 mil- and home furnishings markets, the lion lb in January to 8.8 million lb in company indicates. And as evidence of fiber price August. Meanwhile, output of rayon staple and tow (489 million lb weakening, last week Hoechst through August) is just about the Fibers cut the price of its polyester filament feeder yarn from 93 cents same as last year. FMC says that its closing at to 86 cents a lb following similar Parkersburg will have "minimal" moves by Du Pont and Dow impact on earnings, because the Badische. Little wonder that both Monsanto plant is obsolete. But sprinkled throughout chemical company and Du Pont emphasize the worldthird-quarter reports are strong in- wide dilemma facing the textile dications that fiber operations are business. Earlier this month, Du having—or will have—an adverse Pont's West German subsidiary said impact on earnings. Celanese, for that it would begin cutting back one, says that although strong de- production and laying off workers mand continues for chemicals, at its Uentrop nylon and polyester resins, and specialties, the fibers plant. Hoechst also plans to lay off business began to soften in the third 2500 workers in West Germany, quarter, with polyester textile fila- and similar cutbacks probably will be made in Hoechst's U.S. operament most affected. Du Pont also points to lower fiber tions. Fiber operations in Italy, the demand starting in the third Netherlands, the U.K., and Japan quarter, both in the U.S. and foreign also have felt the sting of the sharp markets. Monsanto president John slump in textile demand.
Profits remain high but demand softening Chalk up another highly profitable I three months for the U.S. chemical industry. But although earnings during the quarter ended Sept. 30 were smartly higher for the major producers—with Du Pont a notable exception—some signs of weakening demand spawned by the lengthening recession in the overall economy are beginning to crop up. Synthetic fiber operations probably have been the most clearly affected by the downturn (see preceding story). Nevertheless, most fiber makers still posted gains in the third quarter. For instance, Monsanto netted a total of $2.99 a share for the quarter, 89% more than the year before. For Celanese, pershare earnings were 43% higher at $1.87, for Rohm & Haas up 77% to $1.91, for FMC up 66% to 83 cents. Incipient sluggishness is not entirely restricted to fibers, though. Monsanto points to a "downturn in sales of electronic materials and developing softness for some monomers, including styrene." Union Carbide sees "minor evidence of slackening demand" stemming from weakness in such markets as auto- I
mobiles, housing, appliances, and furniture. Even so, the company earned a record $2.59 a share in the third quarter, up 116% from the year before. For W. R. Grace, gains in its chemical business were widespread except for construction products; Grace reports earnings of $1.30 a share, 55% ahead of last year. Du Pont's profits for the latest quarter, on the other hand, fell 19% to $2.43 a share. Demand for fibers and some other products softened during the period, the company says. However, its switch to last-in, first-out (LIFO) accounting for domestic inventories chopped a whopping $1.08 a share from reported earnings. Other companies, meanwhile, managed to absorb a changeover to LIFO inventory accounting and still come out well ahead of last year. Dow Chemical's net, for example, shot up 126% to $1.85 a share, despite a net cost of about 50 cents a share from switching to LIFO. And Allied Chemical boosted earnings by 109% to $1.63 a share after charging 24 cents to make the change.
