The Chemical World This Week
FOURTH-QUARTER CHEMICAL EARNINGS DROP Not much was expected for earnings in the U.S. chemical industry in the fourth quarter. About level with last year was the popular estimate. The reason was the continued general business lethargy since the economic recovery went into a holding pattern last spring. As it turns out, earnings of the basic chemical industry probably fell about 9% in the fourth quarter from fourth-quarter 1975. Sales went up about 8%. This is how it looks after official reports from 14 of the 18 largest U.S. basic chemical companies included in C&EN's listing of the Top 50 U.S. chemical operations (C&EN, June 7,1976, page 44). The poor earnings showing in the fourth quarter has confirmed fears of disappointing chemical earnings for full-year 1976. Combined results so far indicate an earnings gain of 19% on a sales pickup of 13% from 1975. Early in 1976, the chemical indus try seemed to be in its strongest earnings posture in a decade. Hopes ran high with predictions for earnings gains over 1975 running from 25 to 50%. These hopes were predicated largely on the industry's success in holding up its product price structure in the severe recession just ended. The unforeseen business pause beginning just a few months later wrecked these projections. The pause created more slack in the industry's use of plant capacity than had been anticipated. Prices first flattened and then, in many cases, went into deep discounts. Meanwhile, the chemical industry's greatest capital spending boom ever went forward nearly full throttle. The result by the end of the year was a sizable margin of unused capacity and a defensive price posture in many important large-volume chemical products. Signs are numerous that the busi ness pause ended about mid-fall. Chemical production, after dipping slightly since early spring, rose to a new peak in November. Important early warning markets, notably syn thetic fibers, began to show new life the same month. By winter, fiber producers were trying to pull up prices in many key product lines. These positive signs have not yet affected earnings, which usually take a quarter or two to show the results of increased production. Perhaps be4
C&EN Jan. 31, 1977
Sneath: satisfactory year for Carbide
cause of the lag in effects of an up swing on the bottom line, most com panies are being cautious on current assessments of the industry. For example, at Union Carbide, one of the better-performing companies in the fourth quarter, chairman Wil liam S. Sneath remains guarded in his
comments. "I regard 1976 as a satis factory year for Union Carbide. Both sales and earnings were below what we had originally expected. This was principally because the economy in the U.S. flattened in midyear, and economies elsewhere in the world did not recover as rapidly as antici pated. "In spite of this, our income from operations during the second half held up well, and this indicates con siderable upside potential as business improves. I see the business outlook for 1977 as favorable, with an increase in real gross national product of about 5%. Nevertheless, we have not yet seen clear evidence of an improving trend." So far, Carbide is keeping in step with previous plans for future-ori ented spending on new plants and R&D. However, Sneath adds a cau tion that the company has given be fore. If the economy or Carbide's performance falls below expectations, the company will reduce or stretch out its capital programs. D
Changes urged in many nvironmental areas What environmentalists view as the most crucial environmental problems facing the U.S. are scheduled to get an airing this week in a day-long sym posium on Capitol Hill in Washing ton, D.C. The symposium will in substance represent a consensus re port, due for publication in March, drafted by a task force of leaders of the 12 largest direct-membership environmental organizations in the U.S. The report makes some 70 rec ommendations for dealing with the problems it outlines. The report touches on a broad range of issues. Energy, pollution abatement, toxic substances, and re combinant DNA research are among the topics that come under its focus. The task force was put together by the Rockefeller Brothers Ρμηά, New York City. The organizations repre sented by task force members— Natural Resources Defense Council, Friends of the Earth, the National Audubon Society, and the Sierra Club, among them—have a collective membership totaling more than 4.3 million.
Among its wide-ranging recom mendations, the report advocates a "new type of energy economy," call ing for a halt to "subsidies to nuclear industries" and urging that existing nuclear facilities be phased out. The task force recommends "a progres sively increasing gasoline tax, the proceeds of which should be used to begin reducing the ill effects of auto mobiles." Institutional barriers to energy conservation such as antique utility practices, mortgage regula tions, and building codes, it says, must be overcome. In dealing with the issue of water and air pollution, the task force says that the integrity and goals of both the Federal Water Pollution Control Act and the Clean Air Act amend ments should be reaffirmed and "defended against debilitating changes." The Environmental Pro tection Agency's research budget, it says, should be increased for com prehensive research on the health effects of air pollution. On the issue of toxic substances, the task force wants priorities in the national cancer plan shifted to cancer
