Lower capacity utilisation drove down operating earnings by 23 per cent year over year at the fibre division of Eastman Chemical in the first quarter ended March 31, 2015.
“First quarter of 2015 operating earnings dived to $90 million compared with $117 million for first quarter of 2014, down 23 per cent,” a press release from Eastman Chemical informed.
“This happened due to lower acetate tow sales volume and related lower capacity utilisation resulting in higher unit costs partially offset by lower raw material and energy costs,” it said.
Sales revenue at the fibre division too decreased in the reporting quarter, primarily due to lower acetate tow and acetyl intermediates sales volume attributed to customer inventory destocking.
Overall sales revenue for the quarter under review stood at $2.4 billion, up 6 per cent year on year driven by Taminco Corp, Commonwealth Laminating & Coating and aviation turbine oil businesses.
Eastman recorded first-quarter of 2015 operating earnings of $435 million, up from $383 million in the corresponding quarter of its previous year
According to the chemicals producer, the increase was mainly due to both improved spread, as lower raw material and energy costs exceeded lower selling prices, and earnings from acquired businesses.
“These were partially offset by lower earnings in the fibre segment, an unfavourable shift in foreign currency exchange rates, and the negative impact of propane hedges,” it noted.
Reported first-quarter of 2015 operating earnings were $311 million compared with $361 million for first quarter of 2014.
Eastman generated $91 million in cash flows from operating activities during first quarter of 2015, however, strong earnings were partially offset by a seasonal increase in working capital.
“The first-quarter working capital increase was lower than usual primarily due to the impact on inventories of the recent decline in raw material and energy costs,” Eastman added.
“We are off to a strong start to the year with excellent first-quarter earnings, demonstrating our focus on execution in difficult business conditions,” said CEO Mark Costa.
“We have done a good job of improving operating margins, reflecting the more specialty nature of our portfolio and our continued discipline in managing costs,” he too added.
He further said, “With our first-quarter results, we are well positioned to deliver our sixth consecutive year of earnings growth in 2015.”
On its outlook for full year of 2015, Eastman expects increasing challenges including global economic uncertainty, the strengthening U.S. dollar, and the impact of volatile oil prices.
Eastman projects solid volume growth in specialty businesses, strong results from recent acquisitions, discipline in managing costs, due to which it feels it is well positioned for sixth consecutive year of EPS growth.
