Eastman Chemical Company (NYSE:EMN) announced its second-quarter
2023 financial results.
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- Solid sequential improvement in earnings despite a persistent
weak demand environment, driven by disciplined pricing, lower
variable costs, and cost saving initiatives
- Continue to expect to reduce cost structure by more than $200
million, net of inflation
- Generated strong operating cash flow in the second quarter and
remain on track with full-year 2023 cash target with aggressive
actions to reduce inventories
(In millions, except per share amounts;
unaudited)
2Q23
2Q22
Sales revenue
$2,324
$2,784
Earnings before interest and taxes
(“EBIT”)
323
426
Adjusted EBIT*
336
469
Earnings per diluted share
2.27
2.03
Adjusted earnings per diluted share*
1.99
2.83
Net cash provided by operating
activities
410
245
*For non-core and unusual items excluded from adjusted
earnings and for adjusted provision for income taxes, segment
adjusted EBIT margins, and net debt, reconciliations to reported
company and segment earnings and total borrowings for all periods
presented in this release, see Tables 3A, 3B, 4A, 4B, and
6.
“Our second-quarter results demonstrated solid improvement
compared with first quarter, reflecting continued commercial
excellence in pricing and the benefit of lower raw material and
energy costs,” said Mark Costa, Board Chair and CEO. “We delivered
this performance despite a global economic environment that
remained challenging due to weak primary demand particularly in
consumer durables and building and construction end markets.
Customer inventory destocking also continued in the second quarter
across a number of end markets. In this sustained challenging macro
environment, we continue to be focused on what we can control
including price discipline, cost reduction, and working capital
management. We continue to be confident in the resiliency of our
portfolio and the sustainability of our strong cash flow going
forward. We are also excited about the progress on our circular
economy initiatives, including our target to produce material and
realize revenue around year end from our Kingsport, Tennessee,
methanolysis facility.”
Corporate Results 2Q 2023 versus 2Q 2022
Sales revenue decreased 17 percent primarily due to 15 percent
lower sales volume/mix.
Sales volume/mix was lower across most product lines due to the
continuation of weak primary demand and continued customer
inventory destocking across several end markets, including consumer
durables, building and construction, agriculture, and medical. This
weakness was partially offset by automotive where we continue to
benefit from momentum in our premium products. Higher selling
prices in Fibers and Advanced Materials reflect the solid price
gains to recover significantly higher raw material, energy, and
distribution costs.
EBIT decreased due to lower sales volume/mix, lower capacity
utilization including actions to reduce inventory, increased
pension expense, and an unfavorable impact from foreign currency.
These factors were partially offset by lower variable costs more
than offsetting lower selling prices.
Segment Results 2Q 2023 versus 2Q 2022
Advanced Materials – Sales revenue was down 13 percent
due to 15 percent lower sales volume/mix, partially offset by 3
percent higher selling prices.
Lower sales volume/mix in specialty plastics was due to
continued weak demand and aggressive customer inventory destocking,
particularly in the consumer durables, medical, and consumables end
markets. The lower sales volume/mix was partially offset by solid
demand in the automotive end market resulting in improved product
mix for advanced interlayers driven by increased sales of premium
products including strong growth in electric vehicles. Higher
selling prices, particularly for advanced interlayers, were a
result of significant levels of inflation.
EBIT decreased due to lower volume/mix, lower capacity
utilization including actions to reduce inventory, and an
unfavorable impact from foreign currency. These factors were
partially offset by slightly higher selling prices and lower
variable costs.
Additives & Functional Products – Sales revenue
decreased 19 percent due to 14 percent lower sales volume/mix and 5
percent lower selling prices.
Sales volume/mix was lower across the segment due to weak demand
especially in the building and construction end market as well as
customer inventory destocking in the agriculture end market
partially offset by continuing recovery of aviation fluids. Lower
selling prices were primarily due to cost pass through contracts in
care additives.
EBIT decreased due to lower sales volume/mix and lower capacity
utilization, partially offset by lower variable costs more than
offsetting lower selling prices.
Fibers – Sales revenue increased 33 percent primarily due
to 32 percent higher selling prices.
Substantially higher selling prices for acetate tow were due to
an increase in industry capacity utilization and higher raw
material, energy, and distribution prices.
EBIT increased due to recovery of margins as higher selling
prices returned EBIT margins to acceptable performance levels.
Chemical Intermediates – Sales revenue decreased 33
percent primarily due to 22 percent lower sales volume/mix and 11
percent lower selling prices.
Sales volume/mix was lower in plasticizers and olefins due to
continued weak end-market demand and customer inventory destocking,
including for building and construction, consumer durables, and
industrial. In addition, the prior year period for acetyl products
included strong sales volume/mix related to tight market conditions
resulting from competitor outages. Selling prices were lower due to
lower raw material prices.
EBIT decreased due to lower sales volume/mix and lower spreads,
which were above mid-cycle levels in the year-ago period.
Cash Flow
In second quarter 2023, cash provided by operating activities
was $410 million compared to $245 million in second quarter 2022.
In second quarter 2023, the company returned $144 million to
stockholders through dividends and share repurchases. See Table 5.
Priorities for uses of available cash for 2023 include organic
growth investments, payment of the quarterly dividend, bolt-on
acquisitions, share repurchases to offset dilution, and net debt
reduction.
2023 Outlook
Commenting on the outlook for full-year 2023, Costa said: “We
delivered solid results in the first half of the year despite the
challenging global economic environment. With the continued
uncertainty, our focus remains on what we can control. This
includes demonstrating strong commercial excellence with pricing
discipline enabling margin recovery as we realize lower raw
material, energy, and distribution costs. We also continue to
expect to reduce our manufacturing, supply chain, and
non-manufacturing costs by a total of $200 million for the year,
net of inflation. Looking to the second half, we continue to expect
auto, aviation, and other markets to modestly improve. However, we
have reduced our demand growth outlook and therefore now expect
primary demand across many of our end markets to be stable compared
with the first half. Given the limited improvement in demand, we
expect inventory destocking by our customers to persist, although
at somewhat lower levels. Consistent with prioritizing cash flow in
this environment, we are taking actions to meaningfully reduce our
inventories, which when combined with reduced demand expectations,
will result in lower capacity utilization and a substantial
earnings headwind in the back half of the year. Taking this
together, we expect second half adjusted earnings per share (EPS)
to be somewhat below first half and for 2023 EPS to be between
$6.50 and $7.00. In addition, we continue to expect to generate
$1.4 billion of operating cash flow in 2023.”
The full-year 2023 projected adjusted diluted EPS excludes any
non-core, unusual, or nonrecurring items. Our financial results
forecasts do not include non-core items (such as mark-to-market
pension and other postretirement benefit gain or loss, and asset
impairments and restructuring charges) or any unusual or
non-recurring items because we are unable to predict with
reasonable certainty the financial impact of such items. These
items are uncertain and depend on various factors, and we are
unable to reconcile projected adjusted diluted EPS excluding
non-core and any unusual or non-recurring items to reported GAAP
diluted EPS without unreasonable efforts.
Forward-Looking Statements
This information and other statements by the company may contain
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act with respect to, among other
items: projections and estimates of earnings, revenues, volumes,
pricing, margins, cost reductions, expenses, taxes, liquidity,
capital expenditures, cash flow, dividends, share repurchases or
other financial items, statements of management’s plans, strategies
and objectives for future operations, and statements regarding
future economic, industry or market conditions or performance. Such
projections and estimates are based upon certain preliminary
information, internal estimates, and management assumptions,
expectations, and plans. Forward-looking statements are subject to
a number of risks and uncertainties, and actual performance or
results could differ materially from that anticipated by any
forward-looking statements. Forward-looking statements speak only
as of the date they are made, and the company undertakes no
obligation to update or revise any forward-looking statement. Other
important assumptions and factors that could cause actual results
to differ materially from those in the forward-looking statements
are detailed in the company’s filings with the Securities and
Exchange Commission (the “SEC”), which are accessible on the SEC’s
website at www.sec.gov and the company’s website at
www.eastman.com.
Conference Call and Webcast Information
Eastman will host a conference call with industry analysts on
July 28, 2023, at 8:00 a.m. ET. To listen to the live webcast of
the conference call and view the accompanying slides and prepared
remarks, go to investors.eastman.com, Events & Presentations.
The slides and prepared remarks to be discussed during the call and
webcast will be available at investors.eastman.com at approximately
5:00 p.m. ET on July 27, 2023. To listen via telephone, the dial-in
number is +1 (833) 470-1428, passcode: 393116. A web replay, a
replay in downloadable MP3 format, and the accompanying slides and
prepared remarks will be available at investors.eastman.com, Events
& Presentations. A telephone replay will be available
continuously from approximately 1:00 p.m. ET, July 28, 2023, to
11:59 p.m. ET, Aug 7, 2023, at +1 (866) 813-9403, passcode
179037.
Founded in 1920, Eastman is a global specialty materials company
that produces a broad range of products found in items people use
every day. With the purpose of enhancing the quality of life in a
material way, Eastman works with customers to deliver innovative
products and solutions while maintaining a commitment to safety and
sustainability. The company’s innovation-driven growth model takes
advantage of world-class technology platforms, deep customer
engagement, and differentiated application development to grow its
leading positions in attractive end markets such as transportation,
building and construction, and consumables. As a globally inclusive
and diverse company, Eastman employs approximately 14,500 people
around the world and serves customers in more than 100 countries.
The company had 2022 revenue of approximately $10.6 billion and is
headquartered in Kingsport, Tennessee, USA. For more information,
visit www.eastman.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20230727108420/en/
Media: Tracy Kilgore Addington 423-224-0498 /
tracy@eastman.com
Investors: Greg Riddle 212-835-1620 / griddle@eastman.com
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