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CHEMICAL EARNINGS
A survey of 12 leading chemical companies that have reported fourth-quarter earnings shows improvement over the same period last year, even though the industry was hit with higher feedstock prices during the quarter. Despite the positive results, most companies are uncertain about the business climate coming into 2003, largely because of the effect that Iraq tensions will have on feedstock prices. Of the 12 companies, only industry leader Dow Chemical and fertilizer maker IMC Global reported losses. Earnings for only two companies--FMC and Cabot--declined. And 10 companies showed increased sales, with FMC and IMC showing decreased revenues. Dow's troubles have continued. Though sales increased 9% over the same quarter last year, to $6.9 billion, the company lost $172 million during the quarter, compared with a loss of $12 million in the year-ago period. The company has said that high feedstock costs and low prices pinched margins. Dow CEO William S. Stavropoulos said the company will cut 3,000 to 4,000 jobs this year, aiming for $400 million in annual savings. In addition, it will divest nonstrategic assets that generated $1.5 billion in annual revenues in 2002. Dow is also closing ethylene crackers in Texas City and Seadrift, Texas, this year, instead of in 2004 as planned.
"This has been a very disappointing quarter. It highlights the urgent need for a more disciplined and focused approach to cost control." William S. Stavropoulos
DuPont, like many of its industry peers, showed signs of recovery, with sales increasing by 9% and earnings more than doubling. Sales and operating income increased for all its segments except electronics. However, looking ahead, executives like Cytec Industries Chairman, President, and CEO David Lilley are pessimistic: "There is continuing economic uncertainty, and we are not expecting an economic recovery heading into 2003. We face the head winds of higher raw materials, employee benefits, and insurance costs." Even the industrial gas companies, which recovered before the rest of the chemical industry, aren't overconfident. Praxair President, Chairman, and CEO Dennis H. Reilley says, "The first quarter may be starting off on a weaker note, as a result of political uncertainty and higher energy prices, which may exacerbate weak demand in electronics and general manufacturing in the U.S."
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