NEWS OF THE WEEK
CHEMICAL EARNINGS JUMP
CHEMICAL COMPANY EARNINGS Double-digit gains are common in third quarter SALES
THIRD QUARTER: Firms post strong growth compared with 2005 period; sales also climb
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HEMICAL FIRMS are reporting much-improved third-quarter earnings compared with the same period in 2005; 10 of the 11 firms that have published their results show double-digit or better growth. The largest earnings growth generally came at the smaller companies. Of the five firms with less than $1 billion in quarterly sales, earnings growth ranged from 25.4% at Cytec Industries to 130.8% at Albemarle. Increases in earnings at the six larger companies were between 8.8% at PPG Industries and 35.7% at DuPont. Albemarle posted a triple-digit improvement in earnings from continuing operations, excluding significant one-time items, of $60.7 million, on a 20% increase in sales to $608 million. "All three of our segments saw continued revenue growth and improved profitability, with both catalysts and polymer additives achieving segment income margins above our 15% corporate goal," says CEO Mark C. Rohr. The second-largest quarterly earnings increase came at Hercules, although it also was the only company in the group to post a decline in sales. Hercules' earnings were up 66.3% to $40.9 million, while sales slipped 1.3% to $513 million. Excluding the impact of the sale of a majority stake in its FiberVisions unit, though, Hercules' sales increased 14%. H.B. Fuller, the second-smallest company of the 11, had the third-largest earnings increase, 56.1% to $24.2 million, as sales rose 8.6% to $389 million. Fuller attributes the improvement to a more profitable mix of businesses combined with continued process improvements and productivity gains.
EARNINGS3 CHANGE FROM 2005
($ MILLIONS)
$2,359.4 Air Products Albemarle 607.8 863.4 Cytec Industries 12,359.0 Dow Chemical DuPont 6,309.0 H.B. Fuller 388.9 Hercules 513.1 PPG Industries 2,802.0 Praxair 2,099.0 Rohm and Haas 2,065.0 302.7 Stepan
$210.3 60.7 42.4 950.0 452.0 24.2 40.9 210.0 247.0 189.0 6.1
SALES
18.3% 20.0 13.5 9.8 7.5 8.6 -1.3 10.0 11.1 7.2 13.9
EARNINGS
19.5% 130.8 25.4 18.6 35.7 56.1 66.3 8.8 28.0 16.0 46.0
PROFIT MARGIN15 2006
2005
8.9% 10.0 4.9 7.7 7.2 6.2 8.0 7.5 11.8 9.2 2.0
8.8% 5.2 4.4 7.1 5.7 4.3 4.7 76 10.2 8.5 1.6
a After-tax earnings from continuing operations, excluding significant extraordinary and nonrecurring items, b After-tax earnings as a percentage of sales.
DuPont's strong 35.7% earnings growth to $452 million came as sales increased just 7.5% to $6.31 billion. The company notes that raw material costs were $180 million higher than in the third quarter last year but were fully offset by increases in selling price. Industry leader Dow Chemical posted earnings of $950 million, up 18.6% from third-quarter 2005, on a 9.8% increase in sales to $12.4 billion. Geoffrey E. Merszei, Dow's chief financial officer says, "This was an excellent quarter: solid price increases across virtually every business and in every geographic region, encouraging volume growth in our performance segments, operating rates that were the highest since first-quarter 2005, and record equity earnings." While reporting earnings, Dow also announced a share repurchase program of up to $2 billion to take effect once its current repurchase plan is concluded. CEO Andrew N. Liveris says, "Our solid financial position allows us to undertake this program while retaining the financial flexibility necessary to invest in our growth strategy, whether through new capital projects or by pursuing appropriate merger and acquisition opportunities."—WILLIAM STORCK
VACCINES World Health Organization prepares action plan for influenza pandemic Concerned about the potential death toll from an international influenza pandemic due to shortages of effective vaccines, the World Health Organization (WHO) is calling for immediate and sustained action and more funding to stockpile vaccines and improve vaccine production. As laid out in its new "Global Pandemic Influenza Action Plan" WHO "sets the course for what needs to be done, starting now, to increase vaccine production capacity and close the gap," comments Marie-Paule Kieny, director of
the WHO Initiative for Vaccine Research. WHO says world flu vaccine capacity by 2 0 0 8 - 0 9 will not likely exceed 2.34 billion doses, but an influenza pandemic, such as widespread avian influenza, would lead to calls to vaccinate the world's entire population of 6.7 billion people. Three approaches to closing the vaccine supply gap are identified in the action plan: increasing seasonal influenza vaccine stockpiles to stimulate industrial production, building production capacity by improving vaccine yields, and increas-
WWW.CEN-0NLINE.ORG
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ing spending on research to design more effective vaccines. The U.S. supports the WHO plan and is already making significant investments to prevent a pandemic, says Department of Health & Human Services Secretary Michael O. Leavitt. In addition, Leavitt says the U.S. is giving $10 million to WHO to support vaccine development in other nations. "It is our collective global resources and cooperation that will make our preparedness efforts a success" Leavitt says.-DAVID HANSON
