By Susan Daker
Of DOW JONES NEWSWIRES
HOUSTON -(Dow Jones)- Exxon Mobil Corp.'s (XOM) chemical business emerged Thursday as a significant source of income for the oil major, bringing in about one-fifth of its third-quarter profits.
The business, which usually gets little mention among the world's largest publicly-traded oil company's oil and gas operations, posted a "very strong quarter," based on comparatively higher margins, said David Rosenthal, vice president of investor relations for ExxonMobil, during an earnings call.
The segment's earnings were down 20% year-over-year. But the figure, $876 million, more than doubled from the second quarter to the third. Credit Suisse analyst Mark Flannery called the results better than expected.
As a whole, the Irving, Texas, company missed analysts' expectations for the second quarter in a row, reporting a profit of $4.73 billion, or 98 cents a share, down from $14.83 billion, or $2.85 a share, a year earlier.
The sequential improvement for the chemical segment could be an indicator that the recession is dissipating. Chemical companies can portend the future of the world's economic health because they produce the building blocks for consumer products: everything from automobile tires to rain boots.
Exxon's competitors in the chemical business, Dow Chemical (DOW) and DuPont (DD), reported earnings last week, also giving tentative guidance that the downturn is lifting because of the increase in sales of key products.
Exxon attributes its success to an ability to use hundreds of different feedstocks, most of which are derived from oil and gas. For example, last month there was a surplus of vacuum gas oil, a distillate produced in the oil refining process, so the company began using it at its chemical plants, said Jeff Neu, an Exxon spokesman. Exxon also benefits from its ability to share feedstocks with its refining business.
"The main driver here is feedstock flexibility and integration with our refining complex," Rosenthal said on the call.
-By Susan Daker, Dow Jones Newswires; (713) 547-9208; susan.daker@dowjones.com