If first-quarter results are any indication, the road back to prosperity might be a longer one than plastics and chemicals makers had hoped. Plastics-related sales tumbled anywhere from 30-60 percent during the quarter at publicly held firms Dow Chemical Co., DuPont Co., Eastman Chemical Co., Celanese Corp., Nova Chemicals Corp. and BASF SE.
All six firms have released quarterly reports in recent days that read like horror novels. Or like Harry Potter and 90 Days of Bad Resin Sales, if you prefer literature aimed at younger readers.
Based on anecdotal evidence, plastics processors are buying just what they need and not a pound more. They're afraid to speculate on next month's demand. The resulting losses at some resin producers make you catch your breath:
* At DuPont Co. in Wilmington, Del., the performance materials business, including its market-leading nylon unit, rang up a pretax loss of $146 million, after showing pretax profit of $219 million in the same quarter last year. That's an alarming about-face.
* For Kingsport, Tenn.-based Eastman, not only did its performance polymers (mostly PET) unit have a $25 million operating loss, its specialty plastics unit had an operating loss of $18 million. This recession apparently doesn't play favorites.
* Nova's last quarter as a public company — it is being bought by International Petroleum Investment Corp. — was one to forget. Sales in its olefins/polyolefins unit plunged 60 percent, slightly worse than the 50 percent plunge registered by its Ineos Nova polystyrene/styrene joint venture.
Those weak sales levels are likely to look atrocious in the second quarter, too, when compared with the (relatively) robust second quarter of 2008. But a look at Wall Street surprisingly shows two of those firm's stock prices have gone up quite a bit since the start of the year, and two others recovered previous losses.
Dow's per-share stock price was near $16 and DuPont's was near $28 in late trading April 30. That's not that far from where each firm started the year. Per-share prices were up 60 percent at Dallas-based Celanese — the world's largest acetal maker — and up 20 percent at Eastman. All four firms bottomed out in March, at prices that made their retirees start to update their resumes.
So has Wall Street already factored in the pain of the first quarter in anticipation of sweeter days ahead? Bank of America Securities-Merrill Lynch in New York has gone so far as to increase its earnings estimates for Eastman, Celanese and Dow for 2009 and 2010.
In these times of trouble, at least one plastics-related company had a decent first quarter. Stamford, Conn.-based Silgan Holdings Inc. — one of North America's 10 largest blow molders and among the 40 largest injection molders — saw first-quarter profit jump 30 percent. Unfortunately, Wall Street rained on Silgan's profit parade, driving its per-share stock price down almost 9 percent.
So has Celanese peaked, or has Silgan bottomed out? That's a question both processors and stockbrokers alike will ponder as the second quarter rolls on.
Esposito is an Akron, Ohio-based Plastics News senior reporter.