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[C&EN, Nov. 19, 2001]
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January 28, 2002
Volume 80, Number 4
CENEAR 80 4 p. 11
ISSN 0009-2347
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Difficult year ended on a tough note as reflected in chemical sales, earnings


It's no surprise that chemical company sales and earnings continued--and sometimes even worsened--their decline in the last quarter of 2001. Slumping economies led to weak demand, falling sales volumes and prices, high inventories, and overcapacity. In response, most companies have been cutting back to reduce operating costs. One of the few positives was an easing in raw material and energy costs.

DuPont's fourth-quarter earnings were reduced by about $370 million as a result of lower volumes and selling prices, but lower energy and raw material costs offset the drop by $120 million. Still, the company's fourth-quarter earnings fell 75% to $124 million, compared with the same quarter last year, excluding one-time items. Including a gain on the sale of its drug business to Bristol-Myers Squibb, DuPont's fourth-quarter earnings were $3.92 billion. Sales fell 17% to $5.23 billion.

Meanwhile, the U.S. industry's largest company, Dow Chemical, has already warned that it will fall short of previous earnings estimates (C&EN, Jan. 7, page 13). The company blames continued pressure on margins in basic chemicals and plastics. Dow will announce its earnings on Jan. 31.

Management at PPG Industries tried to prepare for the downturn. "We anticipated a difficult year by accelerating actions to cut costs and conserve capital," Chairman and CEO Raymond W. LeBoeuf says. Fourth-quarter earnings still fell 34% to $83 million, on sales that were down 7% to $1.91 billion. The firm plans more restructuring moves, including job cuts and closing all or part of facilities no longer needed.

There were a few bright spots. Fourth-quarter sales were up 9% and 6%, respectively, at Albemarle and Cambrex, where pharmaceutical-related businesses contributed to the gains. Earnings still fell 26% at Albemarle, even excluding charges for workforce reductions. Cambrex' earnings fell less, down 21%, as growth in its bioscience unit was offset by weaker specialty chemical and agricultural operations.

H.B. Fuller's earnings rose 1% to $14.4 million, on sales that were down 11% to $323 million. However, if special charges for the company's restructuring initiative are included, net earnings fell just over 9%. As part of its ongoing restructuring, Fuller plans to cut capacity by 20% and its workforce by 5%, or about 250 employees, to reduce annual costs by an estimated $10 million to $12 million.

Air Products & Chemicals, Praxair, and Albemarle all pointed to the negative impact of poor global electronics markets. Praxair reported 3% declines in both sales and earnings in the quarter, with adverse currency exchange having had a major effect. Sales were down 11% and earnings dropped 16% at Air Products.

Looking ahead, DuPont is among the more optimistic companies, predicting that its 2002 earnings, excluding special items, will exceed those for 2001. It anticipates a similar level of economic activity in 2002, with real global gross domestic product growth averaging just below the 1% seen in 2001.

"We recognize that there is more rough water ahead for manufacturers," says Charles O. Holliday Jr., DuPont chairman and CEO, "but the actions we took last year position us to grow earnings per share in 2002, and we continue to take the steps necessary to meet our long-term growth goals."

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Chemical earnings
Dismal financial results continue in fourth quarter
Air Products $1,316.5 $113.7 -11% -16% 8.6% 9.2%
Albemarle 239.2 15.4 9 -26 6.4 9.5
Cambrex 127.9 9.3 6 -21 7.3 9.8
Cytec Industries 314.8 6.8 -12 -77 2.2 8.3
DuPont 5,229.0 124.0 -17 -75 2.4 7.8
H. B. Fuller 322.9 14.4 -11 1 4.5 3.9
Mississippi Chemical 116.0 -1.2 -15 nm def def
PPG Industries 1,907.0 83.0 -7 -34 4.4 6.1
Praxair 1,238.0 118.0 -3 -3 9.5 9.6
a After-tax earnings from continuing operations, excluding significant nonrecurring and extraordinary items. b After-tax earnings as a percentage of sales. def = deficit. nm = not meaningful.

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