February 27, 2012 - IMM@BUCT

BUSINESS
CHEMICAL RESULTS
A slow fourth quarter dragged down earnings at several big chemical firms
FOURTH-QUARTER 2011 FULL-YEAR 2011
SALES EARNINGS a CHANGE FROM 2010 PROFIT MARGIN b SALES EARNINGS a CHANGE FROM 2010 PROFIT MARGIN b
($ MILLIONS) SALES EARNINGS 2011 2010 ($ MILLIONS) SALES EARNINGS 2011 2010
Air Products $2,423 $292 1.3% -1.4% 12.1% 12.4% $10,004 $1,258 8.2% 6.3% 12.6% 12.8%
Albemarle 707 99 16.9 16.5 14.0 14.0 2,869 436 21.4 32.9 15.2 13.9
Ashland 1,930 95 34.7 31.9 4.9 5.0 7,000 -13 -16.9 def nm 3.4
Cabot 762 40 9.8 -37.5 5.2 9.2 3,268 206 13 21.9 6.3 5.8
Celanese 1,614 96 7.1 -6.8 5.9 6.8 6,763 606 14.3 42.3 9.0 7.2
CF Industries 1,718 439 38.8 119.5 25.6 16.2 6,098 1,539 53.8 341.0 25.2 8.8
Cytec Industries 731 40.3 4.4 16.5 5.5 4.9 3,073 179 11.8 20.1 5.8 5.4
Dow Chemical 14,097 289 2.4 -46.3 2.1 3.9 59,985 2,959 11.8 30.8 4.9 4.2
DuPont 8,425 325 13.8 -29.8 3.9 6.3 37,961 3,710 20.5 22.4 9.8 9.6
Eastman Chemical 1,723 100 17.8 -3.8 5.8 7.1 7,178 652 22.9 26.8 9.1 8.8
FMC Corp. 909 112 12.1 40.0 12.3 9.9 3,378 429 8.4 18.8 12.7 11.6
H.B. Fuller 437 26 21.4 18.2 5.9 6.1 1,558 89 14.9 25.4 5.7 5.2
W.R. Grace 826 58 19.2 28.9 7.0 6.5 3,212 269 20.1 30.0 8.4 7.7
Huntsman Corp. 2,632 68 9.1 13.3 2.6 2.5 11,221 408 21.3 104.0 3.6 2.2
Mosaic 3,015 624 12.7 36.5 20.7 17.1 11,174 2,341 32.2 86.1 21.0 14.9
PPG Industries 3,517 216 16.9 5.4 6.1 6.1 14,885 1,095 21.4 -48.9 15.2 36.1
Praxair 2,796 414 6.6 6.7 14.8 14.8 11,252 1,666 11.2 12.9 14.8 14.6
Solutia 526 55 7.6 14.6 10.5 9.8 2,097 267 7.5 193.4 12.7 4.7
Sigma-Aldrich 610 108 4.8 14.9 17.7 16.2 2,505 457 10.3 19.0 18.2 16.9
Stepan 444 15 23.0 35.1 3.5 3.2 1,843 73 28.8 7.4 4.0 4.8
TOTAL c $49,842 $3,512 9.3% 4.2% 7.0% 7.4% $207,324 $18,626 14.8% 36.3% 9.0% 7.6%
a After-tax earnings from continuing operations, excluding significant extraordinary and nonrecurring items. b After-tax earnings as a percentage of sales. c Percentages were calculated
from combined sales and earnings. def = deficit. nm = not meaningful.
ing in the company’s acetyl intermediates
segment, as well as a modest impact to volumes
in the advanced engineered materials
segment,” the company told investors.
Volume declines were also evident at
Huntsman Corp., but higher prices for
polyurethanes, performance products,
and pigments more than offset the impact,
raising revenues by 9.1% and earnings
by 13.3% compared with the 2010 fourth
quarter. CEO Peter R. Huntsman described
customer destocking as “aggressive,” but
he assured investors that Huntsman’s businesses
would revive with the improving
global economy.
Meanwhile, the coatings market was a
mixed bag for paint-oriented companies
such as PPG Industries, which reported
flat volumes year-over-year. Sales in
Europe dropped by 1%, but the firm saw
strengthening global demand in markets
including aerospace, automotive manufacturing,
and general industry. Construction
activity in developed regions was still anemic,
PPG told investors. In total, quarterly
revenues increased 16.9%, and earnings
grew by 5.4%.
PPG isn’t likely to see a rebound in U.S.
construction activity for some time. In early
February, Federal Reserve Chairman Ben S.
Bernanke included a startling statistic in testimony
to Congress. “Since 2009, the pace
of single-family housing starts has averaged
less than 500,000 units per year. During the
15 years before the financial crisis, the pace
of single-family starts had never fallen below
1 million units per year.”
Bernanke added that declines in home
values may be causing a $200 billion to
$375 billion reduction in annual consumer
spending. On the other hand, in 2011, the
U.S. economy added 160,000 jobs per
month, and the unemployment rate fell by
about 1%. That small advance likely contributed
to higher personal spending in the
fourth quarter. According to the Bureau of
Economic Analysis , consumer spending
increased 2.0% in the fourth quarter, after a
third-quarter increase of 1.7%. Spending on
durable goods increased 14.8%, compared
with an increase of 5.7% in the third quarter.
Overall, the gross domestic product
(GDP) increased by an estimated annual
rate of 2.8% in the fourth quarter.
AS THE U.S. ECONOMY crawled out of the
recession, chemical firms depended on developing
countries such as China and Brazil
to offer strong, consistent growth. But as
2011 drew to a close, that approach began to
look less reliable. In the fourth quarter, Du-
Pont’s Kullman told analysts, “Auto builds
were essentially flat, with gains in the U.S.
and Japan offset by declines in every other
region.” In fact, auto manufacturing in the
U.S. increased 10% in 2011 compared with
2010, according to J.D. Power & Associates ,
a marketing information company. J.D.
Power anticipates 6% growth in 2012.
While growth in the U.S. economy is
accelerating—albeit from a low base—
China’s staggering rate of growth is abating.
China’s National Bureau of Statistics
reported that the country’s fourth-quarter
GDP growth slowed to 8.9% from 9.1% in
the third quarter.
Overall, chemical executives say they
expect that the flat volumes that dogged
the industry in the fourth quarter will continue
into the spring and possibly even the
summer of 2012. Anemic sales in Europe
may continue even longer than that. End
markets are expected to stabilize or accelerate
in the second half of 2012.
PPG CEO Charles E. Bunch told investors
that he expects moderate strengthening
in the U.S. but forecasts that global
growth will remain uneven across regions
and industries. “In the aggregate,
emerging-region growth rates are expected
to remain high compared to developed
regions,” he said, “but more moderate and
erratic than they have been in the past.” ◾
WWW.CEN-ONLINE.ORG 26 FEBRUARY 27, 2012