“We reported solid results in the first quarter despite a global economy that continues to be lackluster,” said Mark Costa, CEO. “We remain focused on growth through Eastman-specific actions, including serving growing markets with capacity additions, improving our mix with premium products, and disciplined capital allocation. As a result, Eastman is well positioned for a fifth consecutive year of strong earnings growth.”
Sales revenue was $2.3 billion for both periods. Operating earnings for first quarter 2014 were $361 million, compared with $393 million for first quarter 2013.
Segment Results 1Q 2014 versus 1Q 2013
• Additives & Functional Products - Sales revenue increased slightly as higher sales volume for coatings more than offset lower sales volume for rubber additives. The higher sales volume for coatings was primarily attributed to strong demand in the building and construction and transportation markets. The lower sales volume for rubber additives was primarily attributed to customer inventory destocking in Asia Pacific. Operating earnings declined to $94 million for first quarter 2014 compared with $98 million for first quarter 2013, primarily due to higher raw material and energy costs, particularly for propane.
• Adhesives & Plasticizers - Sales revenue was unchanged as higher sales volume for adhesives resins was offset by lower selling prices for both adhesives resins and plasticizers. Higher sales volume for adhesives resins was primarily attributed to stronger end-market demand, particularly for hygiene and packaging, and customer inventory destocking that negatively impacted first quarter 2013. Lower selling prices for adhesives resins were primarily due to continued competitive pressure resulting from greater industry supply attributed to increased availability of key raw materials and additional competitor capacity. Lower selling prices for plasticizers were primarily attributed to continued competitive pressures resulting from weakened demand in Asia Pacific and Europe. Operating earnings declined to $47 million for first quarter 2014 compared with $49 million for first quarter 2013, primarily due to lower selling prices partially offset by lower operating costs and higher sales volume.
• Advanced Materials - Sales revenue was relatively unchanged as higher sales volume for Eastman Tritan copolyester and premium acoustic interlayers was offset by lower performance films sales volume which was expected due to changes in customer incentive terms in Asia Pacific. Excluding non-core or non-recurring items in first quarter 2014, operating earnings increased to $71 million for first quarter 2014 compared with $65 million for first quarter 2013, primarily due to lower unit costs for specialty plastics.
• Fibers - Sales revenue increased due to higher selling prices, partially offset by lower sales volume. Lower acetate tow sales volume, primarily due to the combination of customer buying patterns and additional industry capacity, including Eastman’s China acetate tow joint venture, was partially offset by acetate flake sales volume to the joint venture. Operating earnings increased to $117 million for first quarter 2014 compared with $114 million for first quarter 2013, primarily due to higher selling prices and sales of acetate flake to the joint venture more than offsetting lower acetate tow sales volume.
• Specialty Fluids & Intermediates - Sales revenue decreased primarily due to lower sales volume for specialty fluids and other intermediates, partially offset by higher selling prices. Lower sales volume for specialty fluids was primarily due to the timing of customer project completions. Higher selling prices were primarily due to increased sales of higher priced specialty fluids and higher raw material and energy costs. Operating earnings decreased to $64 million for first quarter 2014 compared to $95 million for first quarter 2013 primarily due to higher raw material and energy costs, particularly for propane, lower sales volume for specialty fluids, and costs of a weather-related outage at the Longview, TX facility.
Commenting on the outlook for full year 2014, Costa said, “Our solid first-quarter earnings are a good start to the year. Looking forward, we expect sales revenue growth in the remaining three quarters and for full-year sales revenue to be consistent with global GDP growth. We also expect that benefits from Eastman-specific actions and from balanced deployment of our strong cash flow will accelerate earnings growth for the remainder of the year. Given the strength of our differentiated portfolio of businesses, we continue to expect 2014 earnings per share to be between $6.70 and $7.00.”