The Urethane Blog
Everchem Updates
VOLUME XXI
September 14, 2023
Everchem’s exclusive Closers Only Club is reserved for only the highest caliber brass-baller salesmen in the chemical industry. Watch the hype video and be introduced to the top of the league: — read more
October 20, 2022
Dow reports third quarter 2022 results
Oct. 20, 2022 6:00 AM ETDow Inc. (DOW)
MIDLAND, Mich., Oct. 20, 2022 /PRNewswire/ — Dow (NYSE: DOW):
FINANCIAL HIGHLIGHTS
- GAAP earnings per share (EPS) was $1.02; Operating EPS1 was $1.11, compared to $2.75 in the year-ago period and $2.31 in the prior quarter, reflecting margin compression due to higher energy costs, primarily in Europe, the Middle East, Africa and India (EMEAI).
- Net sales were $14.1 billion, down 5% versus the year-ago period, as gains in Performance Materials & Coatings were more than offset by declines in Industrial Intermediates & Infrastructure and Packaging & Specialty Plastics. Sequentially, sales were down 10% with declines in all operating segments and regions.
- Local price increased 3% versus the year-ago period, driven by Performance Materials & Coatings and Industrial Intermediates & Infrastructure. Sequentially, local price decreased 6% with declines in all operating segments and regions.
- Currency decreased net sales by 4% year-over-year and 1% versus the prior quarter due to broad-based strength of the U.S. dollar.
- Volume was down 4% versus the year-ago period, as a 12% decline in EMEAI more than offset 2% volume growth each in the U.S. & Canada and Asia Pacific. Sequentially, volume was down 3%, led by an 8% decline in EMEAI.
- Equity losses were $58 million, compared to equity earnings of $249 million in the year-ago period and $195 million in the prior quarter, led by margin compression in polyurethanes at Sadara and MEG at the Kuwait joint ventures.
- GAAP Net Income was $760 million. Operating EBIT1 was $1.2 billion, down from $2.9 billion in the year-ago period, as gains in Performance Materials & Coatings were more than offset by higher raw material and energy costs as well as lower equity earnings. Operating EBIT decreased from $2.4 billion in the prior quarter due to margin compression across all operating segments.
- Cash provided by operating activities – continuing operations was $1.9 billion, down $779 million year-over-year and up $84 million compared to the prior quarter. Free cash flow1 was $1.5 billion.
- Returns to shareholders totaled $1.3 billion, comprised of $800 million in share repurchases and $493 million in dividends in the quarter.
CEO QUOTE
Jim Fitterling, chairman and chief executive officer, commented on the quarter:
“In the third quarter, Team Dow managed significant macroeconomic headwinds as we swiftly initiated actions and aligned production with supply chain and logistics constraints, prioritized resources toward higher-value products, and reduced operational costs across the enterprise. As a result, we maintained our focus on cash flow generation and continued to execute on our capital allocation strategy, returning $1.3 billion to shareholders.
“Underlying demand remains resilient in the U.S., while high energy and feedstock costs are driving record inflation and impacting demand in the Eurozone, and ongoing lockdowns in China continue to pressure both consumer spending and infrastructure investments. Moving forward, our global scale, geographic diversity, and advantaged feedstock and derivative flexibility will continue to be the source of our distinct advantages. Our track record of employing a disciplined and balanced approach to capital allocation, focus on cash flow generation, and our strengthened balance sheet provide a solid foundation as we continue managing through these dynamic global conditions.”
Industrial Intermediates & Infrastructure
| Three Months Ended September 30 | Three Months Ended June 30 | ||||
| In millions, except margin percentages | 3Q22 | 3Q21 | vs. SQLY [B / (W)] | 2Q22 | vs. PQ [B / (W)] |
| Net Sales | $4,059 | $4,481 | $(422) | $4,370 | $(311) |
| Operating EBIT | $167 | $713 | $(546) | $426 | $(259) |
| Operating EBIT Margin | 4.1 % | 15.9 % | (1,180) bps | 9.7 % | (560) bps |
| Equity Earnings (Losses) | $(114) | $122 | $(236) | $57 | $(171) |
Industrial Intermediates & Infrastructure segment net sales were $4.1 billion, down 9% versus the year-ago period. Local price improved 5% year-over-year with gains in both businesses. Currency decreased net sales by 5%. Volume was down 9% year-over-year, as declines in Polyurethanes & Construction Chemicals were partly offset by gains in Industrial Solutions due to demand strength in pharmaceutical, agricultural, and energy applications. On a sequential basis, the segment recorded a net sales decline of 7% on lower local price and currency with stable volume.
Equity losses for the segment were $114 million, a decrease of $236 million compared to the year-ago period. Competitive pricing pressures in propylene oxide derivatives and MEG due to supply additions in China, as well as lower demand in EMEAI were the main impacts. On a sequential basis, equity earnings decreased by $171 million primarily due to lower price at Sadara and the Kuwait joint ventures.
Operating EBIT was $167 million, compared to $713 million in the year-ago period and $426 million in the prior quarter, as lower EMEAI demand and increased energy and raw material costs were partly offset by higher prices. On a sequential basis, operating EBIT margins declined 560 basis points on lower price and higher energy costs.
Polyurethanes & Construction Chemicals business reported a net sales decrease compared to the year-ago period, as local price gains were more than offset by lower volumes due to inflationary pressures on demand in EMEAI and currency impacts. Sequentially, net sales declined as improved demand in mobility end-markets was more than offset by lower price and inflationary impacts on demand for consumer durables, industrial, and building & construction applications.
Industrial Solutions business reported a net sales increase compared to the year-ago period, driven by local price gains and strong demand for pharmaceutical, agricultural, and energy applications. Sequentially, net sales decreased as strong demand in energy, pharmaceutical, and mobility end-markets and increased catalyst sales were more than offset by price declines and currency impacts.
OUTLOOK
“In the near-term, we expect the macro environment to remain dynamic. As a result, we have outlined a playbook of actions that have the potential to deliver more than $1 billion in cost savings in 2023 while we continue to leverage our scale, geographic diversity and feedstock and derivative flexibility,” said Fitterling. “At the same time, we remain focused on advancing our Decarbonize and Grow strategy with higher-return investments that will extend our competitive advantages and industry leadership positions. Our strong financial position and balance sheet as well as our continued focus on cash flow generation give us ample flexibility to execute on our capital allocation priorities, including attractive shareholder remuneration, as we maximize value creation over the longer-term.”
October 19, 2022
Stepan Reports Record Third Quarter Results and Record Nine Month Earnings
PR Newswire
NORTHBROOK, Ill., Oct. 19, 2022 /PRNewswire/ — Stepan Company (NYSE: SCL) today reported:
Third Quarter Highlights
- Reported net income was a record $39.4 million, or $1.71 per diluted share versus $36.9 million, or $1.59 per diluted share, in the prior year. Adjusted net income* was a record $46.3 million, or $2.01 per diluted share, versus $36.4 million, or $1.57 per diluted share, in the prior year. Total Company sales volume decreased 8% versus the prior year.
- Surfactant operating income was $39.0 million versus $34.5 million in the prior year. This increase was primarily driven by improved product and customer mix that was partially offset by an 8% decline in global sales volume. The sales volume decline was primarily due to lower global commodity laundry demand and raw material constraints in North America. Higher demand in the Functional Products and Institutional Cleaning end markets partially offset the above.
- Polymer operating income was $31.9 million versus $19.8 million in the prior year. This increase was primarily attributable to margin recovery and improved mix that was partially offset by a 10% decrease in global sales volume. The volume decrease was primarily due to an 8% decline in global Rigid Polyol demand driven by double digit declines in Europe and Asia.
- Specialty Product operating income was $9.7 million versus $2.4 million in the prior year. This increase was primarily attributable to improved margins and customer mix within the medium chain triglycerides (MCTs) product line.
- The Company increased its pre-tax environmental reserve from $23.2 million to $33.5 million in the current year quarter. This increase was primarily due to revised environmental remediation cost estimates for the Company’s Maywood, New Jersey site.
- The effect of foreign currency translation negatively impacted net income by $2.4 million, or $0.11 per diluted share, versus the prior year.
- The Company increased its quarterly cash dividend in the fourth quarter of 2022 by $0.03 per share, or 9.0%, marking the 55th consecutive year that the Company has increased its cash dividend to stockholders.
YTD Highlights
- Reported net income for the first nine months of 2022 was a record $136.3 million, or $5.90 per diluted share, versus $120.8 million, or $5.19 per diluted share, in the prior year. Adjusted net income* was a record $140.0 million, or $6.06 per diluted share, versus $121.0 million, or $5.20 per diluted share, in the prior year. Total Company sales volume was down 3% compared to the first nine months of 2021.
* Adjusted net income is a non-GAAP measure which excludes deferred compensation income/expense, cash-settled stock appreciation rights (SARs) income/expense, certain environmental remediation-related costs as well as other significant and infrequent/non-recurring items. See Table II for reconciliations of non-GAAP adjusted net income and earnings per diluted share.
“The Company had strong performance for the first nine months of 2022 and delivered record results, despite ongoing supply chain challenges. Reported net income was up 13% versus the first nine months of 2021 while adjusted net income was up 16%,” said Scott Behrens, President and Chief Executive Officer. “For the quarter, Surfactant operating income was up 13% largely due to improved product and customer mix. This improvement was driven by growth in our Functional Products business as a result of elevated crop and energy prices, which offset an 8% decline in sales volume primarily within our Consumer Products business. Our Polymer income was up 61% due to margin recovery and improved mix that was partially offset by a 10% decline in sales volume. Our Specialty Product results improved significantly due to margin improvement and favorable customer mix.”
Outlook
“The Company delivered record third quarter and nine-month results and we expect to deliver record full year earnings again in 2022. For the fourth quarter we anticipate approximately $8 million of incremental expense related to planned maintenance activity in our North American Phthalic Anhydride plant and low 1,4 dioxane transition costs,” said Scott Behrens, President and Chief Executive Officer. “From a segment perspective, we believe that Surfactants, Polymers and Specialty Products should all deliver full year earnings growth versus prior year. Surfactant volumes within the Functional Products and Industrial Cleaning end markets are expected to show full year growth over 2021. Despite short-term volatility and challenges, we believe that the long-term outlook for Rigid Polyols will remain attractive as energy conservation efforts and more stringent building codes are expected to continue. Looking forward to the next few quarters, we believe the Company will be challenged by slowing global economic growth, weakening consumer and construction demand, continued inflationary pressures and a stronger U.S. dollar. Despite this projected macro environment, we remain committed to executing our long-term growth strategy.”
October 19, 2022
Stepan Reports Record Third Quarter Results and Record Nine Month Earnings
PR Newswire
NORTHBROOK, Ill., Oct. 19, 2022 /PRNewswire/ — Stepan Company (NYSE: SCL) today reported:
Third Quarter Highlights
- Reported net income was a record $39.4 million, or $1.71 per diluted share versus $36.9 million, or $1.59 per diluted share, in the prior year. Adjusted net income* was a record $46.3 million, or $2.01 per diluted share, versus $36.4 million, or $1.57 per diluted share, in the prior year. Total Company sales volume decreased 8% versus the prior year.
- Surfactant operating income was $39.0 million versus $34.5 million in the prior year. This increase was primarily driven by improved product and customer mix that was partially offset by an 8% decline in global sales volume. The sales volume decline was primarily due to lower global commodity laundry demand and raw material constraints in North America. Higher demand in the Functional Products and Institutional Cleaning end markets partially offset the above.
- Polymer operating income was $31.9 million versus $19.8 million in the prior year. This increase was primarily attributable to margin recovery and improved mix that was partially offset by a 10% decrease in global sales volume. The volume decrease was primarily due to an 8% decline in global Rigid Polyol demand driven by double digit declines in Europe and Asia.
- Specialty Product operating income was $9.7 million versus $2.4 million in the prior year. This increase was primarily attributable to improved margins and customer mix within the medium chain triglycerides (MCTs) product line.
- The Company increased its pre-tax environmental reserve from $23.2 million to $33.5 million in the current year quarter. This increase was primarily due to revised environmental remediation cost estimates for the Company’s Maywood, New Jersey site.
- The effect of foreign currency translation negatively impacted net income by $2.4 million, or $0.11 per diluted share, versus the prior year.
- The Company increased its quarterly cash dividend in the fourth quarter of 2022 by $0.03 per share, or 9.0%, marking the 55th consecutive year that the Company has increased its cash dividend to stockholders.
YTD Highlights
- Reported net income for the first nine months of 2022 was a record $136.3 million, or $5.90 per diluted share, versus $120.8 million, or $5.19 per diluted share, in the prior year. Adjusted net income* was a record $140.0 million, or $6.06 per diluted share, versus $121.0 million, or $5.20 per diluted share, in the prior year. Total Company sales volume was down 3% compared to the first nine months of 2021.
* Adjusted net income is a non-GAAP measure which excludes deferred compensation income/expense, cash-settled stock appreciation rights (SARs) income/expense, certain environmental remediation-related costs as well as other significant and infrequent/non-recurring items. See Table II for reconciliations of non-GAAP adjusted net income and earnings per diluted share.
“The Company had strong performance for the first nine months of 2022 and delivered record results, despite ongoing supply chain challenges. Reported net income was up 13% versus the first nine months of 2021 while adjusted net income was up 16%,” said Scott Behrens, President and Chief Executive Officer. “For the quarter, Surfactant operating income was up 13% largely due to improved product and customer mix. This improvement was driven by growth in our Functional Products business as a result of elevated crop and energy prices, which offset an 8% decline in sales volume primarily within our Consumer Products business. Our Polymer income was up 61% due to margin recovery and improved mix that was partially offset by a 10% decline in sales volume. Our Specialty Product results improved significantly due to margin improvement and favorable customer mix.”
Outlook
“The Company delivered record third quarter and nine-month results and we expect to deliver record full year earnings again in 2022. For the fourth quarter we anticipate approximately $8 million of incremental expense related to planned maintenance activity in our North American Phthalic Anhydride plant and low 1,4 dioxane transition costs,” said Scott Behrens, President and Chief Executive Officer. “From a segment perspective, we believe that Surfactants, Polymers and Specialty Products should all deliver full year earnings growth versus prior year. Surfactant volumes within the Functional Products and Industrial Cleaning end markets are expected to show full year growth over 2021. Despite short-term volatility and challenges, we believe that the long-term outlook for Rigid Polyols will remain attractive as energy conservation efforts and more stringent building codes are expected to continue. Looking forward to the next few quarters, we believe the Company will be challenged by slowing global economic growth, weakening consumer and construction demand, continued inflationary pressures and a stronger U.S. dollar. Despite this projected macro environment, we remain committed to executing our long-term growth strategy.”
October 13, 2022
EMPTY PROMISES
Shortages are not unique to the urethane industry, but the promises made at the peak of last year’s turmoil ring at a peculiar frequency. Indeed, desperate times will call on desperate measures. Water is also wet. But the SMEs that made supply-chain miracles happen as little as twelve months ago are expecting their promised exchange of future business to deliver. They’ve been waiting. They’re still waiting.
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October 12, 2022
BASF Group releases preliminary figures for the third quarter of 2022 and announces cost savings program
- Sales, EBIT before special items and EBIT slightly above average analyst estimates
- Net income expected to be €909 million (Q3 2021: €1,253 million) due to non-cash-effective impairments, considerably below the prior-year quarter and considerably below analyst consensus
- Cost savings program of €500 million annually with focus on Europe and particularly Germany due to deteriorating framework conditions
- Outlook for the business year 2022 remains unchanged
Ludwigshafen – October 12, 2022 – BASF has released preliminary figures for the third quarter of 2022. Sales, income from operations (EBIT) before special items and EBIT are slightly above average analyst estimates.
Net income of BASF Group is expected to amount to €909 million. This is considerably below the prior-year quarter figure (Q3 2021: €1,253 million) and the average analyst estimates for the third quarter of 2022 (Vara: €1,105 million). Net income contains non-cash-effective impairments on the shareholding in Wintershall Dea in the amount of about €740 million. These result from the partial write-down of Wintershall Dea’s participation in Nord Stream AG, which operates the Nord Stream 1 pipeline.
Sales increased by 12 percent in the third quarter of 2022 to €21,946 million (Q3 2021: €19,669 million). This was mainly driven by higher prices. Currency effects, primarily relating to the U.S. dollar, had a positive effect as well. Volumes declined compared with the prior-year quarter. Sales thus slightly exceeded average analyst estimates for the third quarter of 2022 (Vara: €21,076 million).
EBIT before special items amounted to an expected €1,348 million in the third quarter of 2022, considerably below the level of the prior-year quarter (Q3 2021: €1,865 million) and slightly above the analyst consensus for the third quarter of 2022 (Vara: €1,313 million). Increased prices for raw materials and energy could only partly be passed on through higher selling prices.
EBIT amounted to an expected €1,294 million in the third quarter of 2022, considerably below the figure for the prior-year quarter (Q3 2021: €1,822 million) and slightly above the analyst consensus for the third quarter of 2022 (Vara: €1,285 million).
The outlook published by the BASF Group for the 2022 business year in July remains unchanged. EBIT before special items continues to be expected between €6.8 billion and €7.2 billion.
Cost savings program of €500 million annually
Against the background of significantly weaker earnings in Europe – especially in Germany, where earnings in the third quarter of 2022 were negative – as well as the deteriorating framework conditions in the region, BASF has initiated a cost savings program focusing on Europe and particularly Germany to be implemented from 2023 to 2024. Cost savings possible in the short term will be implemented immediately. Upon completion, the program is expected to generate annual cost savings of €500 million in non-production areas. More than half of the cost savings are to be realized at the Ludwigshafen site. Operating, service and research & development divisions as well as the corporate center are to be streamlined.
Further measures to structurally adjust BASF’s production Verbund in Europe in the medium and long term are currently being developed and are expected to be communicated in the first quarter of 2023.
Employee representatives in the relevant bodies will be involved regarding the different measures.
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