Eastman Announces First-Quarter 2024 Financial Results

Rhea-AI Summary

Eastman Chemical Company (EMN) reported strong first-quarter 2024 financial results with a sequential increase in sales volume/mix and earnings. The company achieved on spec production and revenue generation at its Kingsport methanolysis facility and was selected by the U.S. Department of Energy for a significant investment in a molecular recycling project. Sales revenue for 1Q24 was $2.31 billion, and adjusted earnings per diluted share were $1.61. The company's CEO, Mark Costa, expressed confidence in the company's ability to deliver earnings growth and strong cash flow going forward.

Positive

• Eastman Chemical Company showed strong sequential earnings growth in 1Q24, exceeding initial expectations.
• Sales volume/mix improved by 4 percent sequentially, indicating a reconnection to primary end-market demand.
• The company achieved on spec production and revenue generation at its Kingsport methanolysis facility.
• Eastman was selected by the U.S. Department of Energy for a significant investment in a molecular recycling project.
• Sales revenue for 1Q24 was $2.31 billion, and adjusted earnings per diluted share were $1.61.
• The company's CEO, Mark Costa, expressed confidence in delivering earnings growth and strong cash flow going forward.

Negative

• Sales revenue decreased in Additives & Functional Products due to lower selling prices and sales volume/mix.
• Sales revenue also decreased in Chemical Intermediates due to lower selling prices, despite a slight increase in sales volume/mix.
• Cash used in operating activities was reported at $16 million for 1Q24.
• Lower spreads led to a decrease in EBIT for the Chemical Intermediates segment.
• The company returned $95 million to stockholders through dividends in 1Q24.

Insights

Financial Analyst

Eastman Chemical Company's report indicates a sequential increase in earnings despite a slight decrease in sales revenue year-over-year. The diluted EPS improvement from 1.12 to 1.39 showcases the company's ability to enhance profitability. Such an increase often results in positive investor sentiment as it may signal operational efficiency and cost management effectiveness. However, it's critical to note the net cash used in operating activities, which has increased significantly from 2 million to 16 million. This could be a red flag regarding the company's cash flow and may warrant further investigation into its capital expenditures and working capital management.

Market Research Analyst

The company's strategic progress, particularly in the Kingsport methanolysis facility, positions it favorably in the circular economy. The anticipated ~75 million in incremental EBITDA from this facility is noteworthy. As sustainability becomes a critical factor in consumer preferences, Eastman's investment in recycling technologies could provide a competitive advantage and potentially drive long-term growth. Investors should track how the demand for sustainable products evolves and how Eastman's portfolio aligns with this trend.

Industry Analyst

With the Department of Energy's selection to invest up to 375 million in Eastman's Longview, Texas project, the company is likely to reinforce its innovation-driven growth model. This government backing not only validates Eastman's initiatives in sustainable practices but also may improve its risk profile. While the projected EPS range of 7.25 to 8.00 and cash from operations of approximately 1.4 billion instills confidence, investors should stay cautious of any market volatility, changes in consumer demand and geopolitical factors that could influence the company's performance in a diversified and competitive chemicals industry.

KINGSPORT, Tenn.--(BUSINESS WIRE)-- Eastman Chemical Company (NYSE:EMN) announced its first-quarter 2024 financial results.

• Delivered strong sequential increase in sales volume/mix and earnings driven by reconnection to primary demand for many of our specialty products in Advanced Materials and Additives & Functional Products.
• Achieved on spec production and revenue generation at our Kingsport methanolysis facility.
• Pathway to ~$75 million of incremental EBITDA in 2024 vs. 2023 from Kingsport methanolysis facility.
• Selected by U.S. Department of Energy to receive up to $375 million investment for our second U.S. molecular recycling project in Longview, Texas.

(In millions, except per share amounts; unaudited)			1Q24	1Q23
Sales revenue			$2,310	$2,412
Earnings before interest and taxes (“EBIT”)			263	246
Adjusted EBIT*			274	283
Earnings per diluted share			1.39	1.12
Adjusted earnings per diluted share*			1.61	1.63
Net cash used in operating activities			(16)	(2)
*For non-core and unusual items excluded from adjusted earnings and for adjusted provision for income taxes, segment adjusted EBIT margins, and net debt, reconciliations to reported company and segment earnings and total borrowings for all periods presented in this release, see Tables 3A, 3B, 4A, and 6.

“We delivered strong sequential earnings growth in the first quarter, above the high-end of our initial expectations,” said Mark Costa, Board Chair and CEO. “In the first quarter, we were encouraged to see continued evidence that inventory destocking is complete across most of our key end markets including consumer durables, building and construction, and personal care. Sales volume/mix improved 4 percent sequentially as demand for our products appears to be reconnecting to primary end-market demand. We are also incredibly proud to have achieved on spec production and revenue generation at our Kingsport methanolysis facility. Achieving this milestone is a direct result of years of commitment and dedication from hundreds of Eastman employees and the support of their families. For their dedication, I am extraordinarily grateful. We have started 2024 with strong momentum. Demand in our base business is recovering, and we have solidified our position as a world leader in the circular economy. I am confident in our ability to deliver earnings growth and strong cash flow going forward.”

Segment Results 1Q 2024 versus 1Q 2023

Advanced Materials – Sales revenue increased 1 percent due to 4 percent higher sales volume/mix partially offset by 3 percent lower selling prices.

Higher sales volume/mix in specialty plastics was the result of reduced levels of customer inventory destocking and a shift towards reconnecting with primary end-market demand, particularly in consumer durables. This growth was partially offset by continued customer inventory destocking in the medical end market and a lower sales volume/mix in performance films due to strong demand in China in the prior-year period.

EBIT increased primarily due to improved price-cost and higher sales volume/mix.

Additives & Functional Products – Sales revenue decreased 9 percent due to 8 percent lower selling prices and 1 percent lower sales volume/mix.

Lower selling prices were primarily due to cost-pass-through contracts in care additives and functional amines. Sales volume/mix decreased slightly as growth in coatings additives and care additives was more than offset by lower sales volume/mix in specialty fluids due to the timing of the fulfillment of heat transfer fluid projects and continued customer inventory destocking in the agriculture end market.

EBIT decreased due to lower sales volume/mix and higher manufacturing costs, including planned maintenance shutdowns, partially offset by favorable price-cost due to lower variable costs more than offsetting lower selling prices.

Fibers – Sales revenue increased 9 percent due to 7 percent higher sales volume/mix and 2 percent higher selling prices.

Sales volume/mix increased primarily due to a double-digit percent increase in textiles driven by continued strong adoption of Naia™ sustainable textile products as customers prioritize sustainability in addition to functionality.

EBIT increased due to higher sales volume/mix and improved price-cost.

Chemical Intermediates – Sales revenue decreased 11 percent due to 13 percent lower selling prices, partially offset by 2 percent higher sales volume/mix.

Lower selling prices across the segment were due to weak market conditions and lower variable costs. Sales volume/mix increased slightly driven by growth in the plasticizers product line due to reduced levels of customer inventory destocking and a shift towards reconnecting with primary end-market demand in building and construction.

EBIT decreased due to lower spreads.

Cash Flow

In first quarter 2024, cash used in operating activities was $16 million. The company returned $95 million to stockholders through dividends. See Table 5. Priorities for uses of available cash for 2024 include organic growth investments, payment of the quarterly dividend, bolt-on acquisitions, and share repurchases.

2024 Outlook

Commenting on the outlook for full-year 2024, Costa said: “We delivered strong first-quarter results that were above our expectations, reflecting both better than expected sales volume/mix and continued pricing discipline. We are encouraged to see continued evidence that customer inventory destocking is behind us across most of our key end markets. Looking forward to the remainder of the year, primary demand in key markets and geographies remains uncertain. However, we continue to benefit from our innovation-driven growth model that enables growth above our end markets. We also expect to benefit from revenue and earnings generated by our Kingsport methanolysis facility, mostly in the second half of the year. We expect continued pricing discipline and improving asset utilization throughout the year. Taking these drivers together, we continue to expect 2024 EPS to be between $7.25 and $8.00 and for 2024 cash from operations to be approximately $1.4 billion.”

The full-year 2024 projected adjusted diluted EPS and Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) exclude any non-core, unusual, or nonrecurring items. Our financial results forecasts do not include non-core items (such as mark-to-market pension and other postretirement benefit gain or loss, and asset impairments and restructuring charges) or any unusual or non-recurring items because we are unable to predict with reasonable certainty the financial impact of such items. These items are uncertain and depend on various factors, and we are unable to reconcile projected adjusted diluted EPS and EBITDA excluding non-core and any unusual or non-recurring items to reported GAAP diluted EPS or net earnings without unreasonable efforts.

Forward-Looking Statements

This information and other statements by the company may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to, among other items: projections and estimates of earnings, revenues, volumes, pricing, margins, cost reductions, expenses, taxes, liquidity, capital expenditures, cash flow, dividends, share repurchases or other financial items, statements of management’s plans, strategies and objectives for future operations, and statements regarding future economic, industry or market conditions or performance. Such projections and estimates are based upon certain preliminary information, internal estimates, and management assumptions, expectations, and plans. Forward-looking statements are subject to a number of risks and uncertainties, and actual performance or results could differ materially from that anticipated by any forward-looking statements. Forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update or revise any forward-looking statement. Other important assumptions and factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company’s filings with the Securities and Exchange Commission (the “SEC”), which are accessible on the SEC’s website at www.sec.gov and the company’s website at www.eastman.com.

Conference Call and Webcast Information

Eastman will host a conference call with industry analysts on Apr. 26, 2024, at 8:00 a.m. ET. To listen to the live webcast of the conference call and view the accompanying slides and prepared remarks, go to investors.eastman.com, Events & Presentations. The slides and prepared remarks to be discussed during the call and webcast will be available at investors.eastman.com at approximately 4:30 p.m. ET on Apr. 25, 2024. To listen via telephone, the dial-in number is +1 (833) 470-1428, passcode: 896570. A web replay, a replay in downloadable MP3 format, and the accompanying slides and prepared remarks will be available at investors.eastman.com, Events & Presentations. A telephone replay will be available continuously beginning at approximately 1:00 p.m. Eastern Time, Apr. 26, 2024, through 11:59 p.m. Eastern Time, May 6, 2024, Toll Free at +1 (866) 813-9403, passcode 784138.

Founded in 1920, Eastman is a global specialty materials company that produces a broad range of products found in items people use every day. With the purpose of enhancing the quality of life in a material way, Eastman works with customers to deliver innovative products and solutions while maintaining a commitment to safety and sustainability. The company’s innovation-driven growth model takes advantage of world-class technology platforms, deep customer engagement, and differentiated application development to grow its leading positions in attractive end markets such as transportation, building and construction, and consumables. As a globally inclusive and diverse company, Eastman employs approximately 14,000 people around the world and serves customers in more than 100 countries. The company had 2023 revenue of approximately $9.2 billion and is headquartered in Kingsport, Tennessee, USA. For more information, visit www.eastman.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240425795736/en/

Media: Tracy Kilgore Addington

423-224-0498 / tracy@eastman.com

Investors: Greg Riddle

212-835-1620 / griddle@eastman.com

Source: Eastman Chemical Company

FAQ

What were Eastman Chemical Company's sales revenue and adjusted earnings per diluted share for 1Q24?

Eastman Chemical Company reported sales revenue of $2.31 billion and adjusted earnings per diluted share of $1.61 for the first quarter of 2024.

What milestone did Eastman achieve at its Kingsport methanolysis facility?

Eastman achieved on spec production and revenue generation at its Kingsport methanolysis facility.

Why was Eastman selected by the U.S. Department of Energy?

Eastman was selected by the U.S. Department of Energy to receive up to $375 million for its second U.S. molecular recycling project in Longview, Texas.

What was the cash used in operating activities for Eastman in 1Q24?

Eastman reported cash used in operating activities of $16 million for the first quarter of 2024.

What was the outlook provided by CEO Mark Costa for full-year 2024?

CEO Mark Costa expects Eastman to deliver EPS between $7.25 and $8.00 for full-year 2024, with approximately $1.4 billion in cash from operations.