Eastman Chemical Co. has bid a not-so-fond farewell to 2009 — a year in which the firm's plastics-related sales fell more than 25 percent.
Combined sales from Eastman's performance polymers and specialty plastics units were just under $1.5 billion for 2009, after falling just short of the $2 billion mark in 2008, officials with Kingsport, Tenn.-based Eastman said in a Jan. 28 news release.
Sales in performance polymers — including PET — fell 33 percent to about $720 million. Eastman ranks as one of North America's largest PET suppliers. Sales of specialty plastics, including Tritan-brand copolyester, fell 19 percent to about $750 million.
Based on sales, the two plastics-related units were the smallest of Eastman's five reporting segments in 2009. Specialty plastics generated 15 percent of Eastman's $5 billion sales total in 2009, with performance polymers contributing 14 percent.
Performance polymers posted a full-year operating loss of $66 million — $9 million larger than its 2008 operating loss. Specialty plastics registered an operating profit of $14 million, a drop of 60 percent from 2008.
Officials cited lower selling prices for the performance polymers sales drop and operating loss. Operational challenges at the firm's Columbia, S.C., PET plant also contributed to the operating loss, they said. For specialty plastics, officials attributed the sales drop to the global recession, which weakened demand for resins, including copolyester products sold into consumer and durable-goods markets. The decline in operating earnings was connected to lower sales volume and lower capacity utilization, which created higher unit costs.
Specialty plastics may have seen a ray of light in the fourth quarter of 2009, as sales grew 6 percent to $205 million. Fourth-quarter sales in performance polymers continued to struggle, falling 17 percent to $156 million.
In spite of a 25 percent drop in overall company sales — and a 60 percent drop in overall profit — Eastman President and CEO Jim Rogers said the firm's 2009 performance “was significantly better than the last recession.”
“We are well-positioned for earnings to improve going forward as the global economy rebounds, and we remain focused on strong cash generation,” Rogers said.
Eastman is “in the early stages of a recovery in our sales volume, which we expect will continue through the year as the global economy improves,” he added. ”We also will continue to benefit in 2010 from the cost-reduction actions we took in 2009.”
Stock analyst Kevin McCarthy with Bank of America/Merrill Lynch in New York said in a note to investors that although Eastman's financials are improving, his firm remains neutral in its outlook for Eastman.
“PET fundamentals remain weak, with industry operating rates near 80 percent,” McCarthy said. “We expect strong earnings and cash flow in fibers and [coatings and adhesives] to compensate for depressed demand in performance chemicals and intermediates and weak margins in polyester resins.”
On Wall Street, Eastman's wild 2009 ride saw its per-share stock price bottom out at $18 in early March before beginning an impressive comeback that hit $60 by mid-November. The price was around $59 in midday trading Feb. 3.
Copyright 2010 Crain Communications Inc. All Rights Reserved.