Eastman Chemical Company (NYSE:EMN) announced its second-quarter
2021 financial results.
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the full release here:
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(In millions, except per share
amounts)
2Q21
1Q21
2Q20
Sales revenue
$2,653
$2,409
$1,924
Earnings (loss) before interest and taxes
(“EBIT”)
(56)
389
54
Adjusted EBIT*
454
400
195
Earnings (loss) per diluted share
(1.07)
1.99
0.20
Adjusted earnings per diluted share*
2.46
2.13
0.85
Net cash provided by operating
activities
426
216
436
Free cash flow*
319
125
339
*For non-core items excluded from
adjusted earnings and for adjusted provision for income taxes,
calculation of free cash flow, segment adjusted EBIT margins, and
net debt, and reconciliations to reported company and segment
earnings and to cash provided by operating activities and total
borrowings for all periods presented in this release, see Tables
3A, 3B, 4A, 4B, 5A, 5B, and 6.
“Our strong second-quarter results are directly related to the
hard work and exceptional dedication of Eastman employees around
the world,” said Mark Costa, Board Chair and CEO. “Second-quarter
revenue and adjusted EPS were both quarterly records reflecting
continued improvement in global economic growth, the benefit of our
innovation-driven growth model, and our outstanding ability to
execute. In our specialty businesses, we grew more than our end
markets thanks to the progress we are making on our innovation and
market development initiatives. Our focus on free cash flow
resulted in strong performance in the first half of the year, with
higher free cash flow than first half 2020.”
Costa continued, “We remain focused on creating value for all of
our stakeholders. We are enabling our customers to win through
innovation across our markets. We are also making significant
progress on our circular economy platforms, which is expanding how
we grow while contributing to the solution for a serious global
environmental challenge. At the same time, we continue to invest in
our employees’ capabilities to grow the company. We remain
confident that the disciplined execution of our strategy will
enable us to build on our strong value creation in 2021 into 2022
and beyond for our investors.”
Corporate Results 2Q 2021 versus 2Q 2020 and 1Q 2021
Compared to second quarter 2020, sales revenue increased 38
percent and was higher across all reporting segments. Volume / mix
increased 20 percent, led by strong growth in Advanced Materials
and Additives & Functional Products, and selling prices
increased 16 percent, led by strong pricing in Chemical
Intermediates.
The large increase in revenue was due to strong demand recovery
across key end markets, including transportation, building and
construction, and consumer durables in comparison to second quarter
2020, which was acutely impacted by lockdowns and other weakened
business conditions resulting from COVID-19. Higher selling prices
were due to higher raw material, energy, and distribution prices
attributed to economic recovery.
Compared to second quarter 2020, adjusted EBIT increased
significantly due to continued strong demand across key end
markets, leading to higher volumes and more favorable product mix
led by increased sales of specialty products in Advanced Materials
and Additives & Functional Products. Spreads were higher due to
Chemical Intermediates price increases that outpaced higher raw
material costs.
Compared to first quarter 2021, sales revenue increased led by
higher selling prices due to higher raw material prices, higher
distribution costs, and tight market conditions, particularly in
the Chemical Intermediates segment. Volume / mix growth of 2
percent was due to continued strong demand across key end markets,
including building & construction and consumer durables.
Adjusted EBIT increased due to higher spreads between selling
prices and raw material, energy, and distribution costs,
particularly in Chemical Intermediates, and more favorable product
mix, led by sales of specialty products in the Advanced Materials
and Additives & Functional Products segments. Strong EBIT
growth was partially offset by higher distribution costs, raw
material supply shortages, and higher planned manufacturing
maintenance costs.
Segment Results 2Q 2021 versus 2Q 2020 and 1Q 2021
Additives & Functional Products – Compared to second
quarter 2020, sales revenue increased 35 percent driven by 23
percent volume / mix growth and a 9 percent increase in selling
prices.
Sales volume increased due to recovery in key end markets
negatively impacted by COVID-19. More favorable product mix was
partially due to increased sales of coatings additives products.
Higher selling prices were primarily due to higher raw material
prices. Adjusted EBIT increased due to more favorable product mix
and higher sales volumes, partially offset by modestly lower
spreads.
Compared to first quarter 2021, sales revenue increased due to
higher selling prices attributed primarily to a continuing increase
in raw material prices. Sales volume / mix was flat as increased
volume in building & construction end markets was offset by
limited product availability resulting from planned manufacturing
maintenance shutdowns. Adjusted EBIT was slightly lower due to
higher planned manufacturing maintenance costs, partially offset by
increased spreads.
Advanced Materials – Compared to second quarter 2020,
sales revenue increased 36 percent primarily driven by 31 percent
volume / mix growth.
More favorable product mix across the segment was led by
increased sales of premium products including performance films and
specialty plastics products. Higher sales volume was due to
recovery in key end markets negatively impacted by COVID-19.
Adjusted EBIT increased due to higher sales volumes and more
favorable product mix, partially offset by modestly lower
spreads.
Compared to first quarter 2021, sales revenue increased
particularly for specialty plastics in consumer durables end
markets as the impact of innovation and market development
initiatives resulted in growth that was more than the underlying
markets. Selling prices increased due to strong end-market demand
for specialty plastics products and overall higher raw material and
distribution prices. Adjusted EBIT was slightly higher as increased
volume / mix and higher selling prices were mostly offset by higher
raw material costs, higher distribution costs, and continued
investment in growth.
Chemical Intermediates – Compared to second quarter 2020,
sales revenue increased 60 percent mostly driven by a 51 percent
increase in selling prices due to higher raw material prices.
Adjusted EBIT increased primarily due to higher spreads as selling
prices outpaced higher raw material and energy costs.
Compared to first quarter 2021, sales revenue increased due to
higher selling prices resulting from a continued increase in raw
material prices and tight market conditions. Adjusted EBIT
increased due to higher spreads.
Fibers – Compared to second quarter 2020, sales revenue
increased 6 percent due to 7 percent volume / mix growth partially
offset by 2 percent lower selling prices.
Higher sales volume was driven by the continued recovery of the
textiles end market, which was negatively impacted by COVID-19.
Lower selling prices were mostly due to previously negotiated
multi-year contracts for acetate tow. EBIT decreased as higher
textiles sales volume was more than offset by lower selling prices
and the discontinuation of a tobacco specialty product.
Compared to first quarter 2021, sales revenue increased 3
percent due to increased volume / mix attributed in part to
continued recovery in textiles end markets. EBIT was lower
primarily due to higher manufacturing maintenance shutdown
costs.
Cash Flow
In first half 2021, cash from operating activities was $642
million. Free cash flow (cash from operating activities less net
capital expenditures) was $444 million, up approximately 8 percent
from first half 2020 despite a use of cash for an increase in
working capital primarily due to improved economic and business
conditions. See Tables 5A and 5B. In first half 2021, the company
returned $328 million to stockholders through dividends and share
repurchases.
Priorities for uses of available cash for 2021 include payment
of the quarterly dividend, bolt-on acquisitions, share repurchases,
and further reduction of net debt.
Agreement to Sell Tire Additives Business Product
Lines
As previously reported, Eastman entered into a definitive
agreement with an affiliate of One Rock Capital Partners, LLC (“One
Rock”) to sell rubber additives (including Crystex™ insoluble
sulfur and Santoflex™ antidegradants) and other product lines and
related assets and technology of the global tire additives business
of its Additives & Functional Products segment. The sale does
not include the Eastman Impera™ and other performance resins
product lines of the tire additives business. The total sale price
of $800 million consists of $725 million cash at closing and an
additional amount of up to $75 million to be paid based on
performance of the rubber additives business post-closing through
2023. As of the definitive agreement date and until the sale, the
assets and liabilities (“disposal group”) included in the sale will
be reported separately on the Unaudited Consolidated Statements of
Financial Position as held for sale. A preliminary loss on business
held for sale is recognized in the second quarter (the difference
in net book value of the disposal group and total sale price and
other consideration, anticipated costs to sell and the value of
certain continuing transition services and agreements). Upon the
change in classification to held for sale, depreciation and
amortization charges of assets within the disposal group ceased.
Revenue for the tire additives product line represented 14 percent
of Additives & Functional Products segment revenue in 2020.
2021 Outlook
Commenting on the outlook for full-year 2021, Costa said: “Our
employees around the world continue to do a great job executing in
a challenging environment, mitigating the ongoing impact of
COVID-19, supply chain disruptions, and overall tight market
conditions. We delivered record first-half adjusted EPS and are on
track for continued strong performance in the second half as we
grow faster than recovering end markets due to our
innovation-driven growth model. We also remain disciplined on costs
as we implement our operations transformation program. With strong
first-half results and continued momentum into the second half, we
now expect 2021 adjusted EPS to be between $8.80 and $9.20. We are
also increasing our expectation for free cash flow to greater than
$1.1 billion, which would be the fifth consecutive year of free
cash flow above $1 billion.”
The full-year 2021 projected earnings exclude 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, asset impairments and
restructuring charges and loss on business held for sale) or any
unusual or non-recurring items, and we accordingly are unable to
reconcile projected earnings excluding non-core and any unusual or
non-recurring items to reported GAAP earnings without unreasonable
efforts.
Forward-Looking Statements
This news release includes forward-looking statements concerning
current expectations and assumptions for future global economic
conditions and the impact of the COVID-19 coronavirus pandemic on
demand in key end markets; competitive position and acceptance of
specialty products in key markets; mix of products sold; capacity
utilization, manufacturing costs, and cost reductions; and revenue,
earnings, cash flow, cash and cash equivalents, and debt repayment
for full-year 2021. Such expectations and assumptions are based
upon certain preliminary information, internal estimates, and
management assumptions, expectations, and plans, and are subject to
a number of risks and uncertainties inherent in projecting future
conditions, events, and results. Actual results could differ
materially from expectations and assumptions expressed in the
forward-looking statements if one or more of the underlying
assumptions or expectations prove to be inaccurate or are
unrealized. Important factors that could cause actual results to
differ materially from such expectations are and will be detailed
in the company's filings with the Securities and Exchange
Commission, including the Form 10-Q filed for first-quarter 2021
available, and the Form 10-Q to be filed for second quarter 2021
and to be available, on the Eastman web site at www.eastman.com in
the Investors, SEC filings section.
Conference Call and Webcast Information
Eastman will host a conference call with industry analysts on
August 3, at 9:00 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 August 2, 2021. To listen via telephone, the
dial-in number is 323-994-2093, passcode number 7246635. 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 12:00 p.m. ET, August 3,
2021 to 12:00 p.m. ET, August 13, 2021 at 888-203-1112 or
719-457-0820, passcode 7246635.
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 2020 revenues of approximately $8.5 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/20210802005761/en/
Media: Tracy Kilgore Addington 423-224-0498 /
tracy@eastman.com
Investors: Greg Riddle 212-835-1620 / griddle@eastman.com
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