Eastman Chemical Company (NYSE:EMN) announced its third-quarter
2023 financial results.
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- Generated greater than $500 million cash from operating
activities in the third quarter, underpinned by decisive actions to
reduce inventories
- Modest sequential improvement in volume/mix in several key end
markets, including consumer durables and personal care, despite a
persistently weak demand environment
- On track to achieve full-year cost reductions of more than $200
million, net of inflation
- Remain on track to produce material and realize revenue from
the Kingsport methanolysis facility around end of year
(In millions, except per share amounts;
unaudited)
3Q23
3Q22
Sales revenue
$2,267
$2,709
Earnings before interest and taxes
(“EBIT”)
256
324
Adjusted EBIT*
256
333
Earnings per diluted share
1.49
2.46
Adjusted earnings per diluted share*
1.47
2.05
Net cash provided by operating
activities
514
256
*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 third-quarter results reflect decisive steps we took to
aggressively reduce inventories and prioritize strong cash
generation,” said Mark Costa, Board Chair and CEO. “We delivered
this strong cash flow against a backdrop of persistently weak
demand and continued inventory destocking across several of our key
end markets. We are encouraged to see modest improvements in demand
across some markets, including consumer durables and personal care,
but the pace of recovery has been slower than expected. We continue
to focus on controllable actions, including maintaining cost
discipline, defending the value of our products with resilient
pricing, and managing working capital. These actions contribute to
my confidence in the resiliency of our portfolio and sustainability
of our strong cash flow going forward. We are also incredibly
excited to be on track for producing material and realizing revenue
from our Kingsport, Tennessee, methanolysis facility around the end
of the year, further positioning Eastman as a leader in the
circular economy.”
Corporate Results 3Q 2023 versus 3Q 2022
Sales revenue decreased 16 percent due to 11 percent lower sales
volume/mix and 5 percent lower selling prices.
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.
Lower selling prices in Chemical Intermediates and Additives &
Functional Products more than offset higher selling prices in
Fibers.
EBIT decreased due to lower sales volume/mix, lower capacity
utilization to drive cash generation, increased pension expense, as
well as an unfavorable impact from foreign currency. These factors
were partially offset by lower variable costs more than offsetting
lower selling prices and benefits from cost reduction actions.
Segment Results 3Q 2023 versus 3Q 2022
Advanced Materials – Sales revenue was down 16 percent
due to 17 percent lower sales volume/mix.
While specialty plastics end-market demand improved compared to
second quarter 2023, sales volume/mix was 26 percent lower compared
to third quarter 2022 as the business recovers from weak demand and
aggressive customer inventory destocking, particularly in the
consumer durables, medical, and consumables end markets.
EBIT decreased due to lower sales volume/mix, significantly
lower capacity utilization to drive cash generation, and an
unfavorable impact from foreign currency. These factors were
partially offset by the continued flow through of lower variable
costs.
Additives & Functional Products – Sales revenue
decreased 26 percent primarily due to 18 percent lower sales
volume/mix and 9 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 aggressive customer inventory destocking in the agriculture
end market. Lower selling prices were primarily due to
cost-pass-through contracts.
EBIT decreased due to lower sales volume/mix and lower capacity
utilization to drive cash generation, partially offset by lower
variable costs more than offsetting lower selling prices.
Fibers – Sales revenue increased 29 percent primarily due
to 28 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 throughout 2022.
EBIT increased due to recovery of margins as higher selling
prices returned EBIT margins to acceptable performance levels.
Chemical Intermediates – Sales revenue decreased 21
percent due to 19 percent lower selling prices and 2 percent lower
sales volume/mix.
Lower selling prices and sales volume/mix, particularly for
olefins, were primarily due to weak end-market demand.
EBIT decreased due to lower sales volume/mix, lower capacity
utilization, and lower spreads.
Cash Flow
In third quarter 2023, cash provided by operating activities was
$514 million compared to $256 million in third quarter 2022. The
strong increase compared to the prior year period was primarily
driven by a substantial reduction of inventories. In third quarter
2023, the company returned $94 million to stockholders through
dividends. 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:
“Despite the continued challenging global economic environment, we
were able to deliver on our earnings and cash flow expectations for
the third quarter. This performance was the result of disciplined
pricing across the portfolio, strong results in the Fibers segment,
and decisive actions to generate strong cash flow. We also remain
on track to reduce our cost structure by a total of $200 million
for the year, net of inflation. As we enter the fourth quarter,
demand remains muted as customers are cautious in the current
challenging environment. We are also expecting normal seasonality
in key end markets, including building and construction, consumer
durables, and performance films automotive applications. And we
will continue our decisive actions to generate cash. Taking this
together, we expect 2023 EPS to be between $6.30 and $6.50, and for
2023 operating cash flow to approach $1.4 billion.”
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
Oct. 27, 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
4:30 p.m. ET on Oct. 26, 2023. To listen via telephone, the dial-in
number is +1 (833) 470-1428, passcode: 945195. 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 beginning at approximately 1:00 p.m. Eastern Time,
Oct. 27, 2023, through 11:59 p.m. Eastern Time, Nov. 6, 2023, Toll
Free at +1 (866) 813-9403, passcode 971032.
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/20231026078553/en/
Media: Tracy Kilgore Addington 423-224-0498 /
tracy@eastman.com
Investors: Greg Riddle 212-835-1620 / griddle@eastman.com
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