EARNINGS PREVIEW: US Chemical Companies Hurt By Less Demand
January 17 2012 - 04:22PM
Dow Jones News
TAKING THE PULSE: A shaky global economy and lighter demand have
hurt a number of U.S. chemical companies, causing several of them
to warn of weaker upcoming earnings. Most notably, DuPont Co. (DD)
said more customers are drawing down their inventories instead of
buying more products, a problem that is expected to resonate
throughout the chemicals sector.
Chemical companies had been buoyed by cheap feedstock as shale
gas expansion has driven down input costs, and emerging markets
remain a key driver for growth. Construction-related business and
materials for consumer products have been the weakest spots.
Mergers and acquisitions have picked up, so capital and excess
profit allocation will be another key focus.
COMPANIES TO WATCH:
Air Products & Chemicals Inc. (APD) - reports Jan. 24
Wall Street Expectations: Wall Street forecasts a fiscal
first-quarter profit of $1.36 a share on revenue of $2.53 billion.
A year earlier, the company's per-share profit was $1.23, or $1.35
excluding charges tied to its failed takeover bid for rival Airgas
Inc. (ARG), on $2.39 billion in revenue.
Key Issues: The specialty-gas supplier and chemical maker warned
of softer first-quarter results on economic uncertainty but said it
was well-positioned with a large backlog of projects. This month,
the company agreed to sell its continental European home care
business to Linde AG (LNEGY, LIN.XE) for EUR590 million ($750.7
million) as it looks to focus on its core gases business. It is
also evaluating options for its remaining home care interests in
the U.K., Ireland, Argentina and Brazil. Air Products has seen
double-digit earnings growth and higher volume recently thanks to
Asian demand, and the company hopes to continue that momentum with
stepped-up investments in China and India.
DuPont Co. (DD) - reports Jan. 24
Wall Street Expectations: Analysts predict a profit of 33 cents
a share on $8.53 billion in revenue. A year earlier, DuPont posted
a profit of 40 cents a share, or 50 cents excluding special items,
on total revenue of $7.74 billion.
Key Issues: DuPont, a diversified U.S. manufacturer, repeatedly
warned of a weaker fourth quarter and recently lowered its profit
guidance for 2011, citing nagging uncertainty in the global economy
forcing its customers to work down their inventories instead of
buying more products. DuPont was among the first companies to
highlight the practice, known as destocking, in the fall as
customers trimmed inventories, though the declines are far less
dramatic than seen at the start of the past recession. The company
last month forecast 2012 earnings largely above market estimates,
signaling hope for the manufacturing sector's prospects.
Praxair Inc. (PX) - reports Jan. 25
Wall Street Expectations: Praxair's fourth-quarter profit is
expected to be $1.37 a share, with revenue of $2.84 billion. A year
earlier, it posted a profit of 43 cents a share, or $1.25 excluding
an income-tax settlement charge, on $2.62 billion in revenue.
Key Issues: Praxair, the largest industrial gas company in North
America and South America, has maintained better earnings on recent
strength in Asia and South America, though North America remains
its biggest market, making up about half its sales. The company
continued to see strong earnings growth in its third quarter, as it
posted double-digit revenue increases across all geographic
regions.
Airgas Inc. (ARG) - reports Jan. 26
Wall Street Expectations: Analysts surveyed by Thomson Reuters
anticipate a fiscal third-quarter profit of 97 cents a share on
$1.14 billion in revenue. For the same quarter last year, Airgas
earned 65 cents a share, or 80 cents a share excluding
takeover-related costs and other items, with $1.03 billion in
revenue.
Key Issues: Airgas has increased its customer base and reported
recent double-digit profit gains, thanks to a boost in industrial
activity. The company, which supplies canisters of oxygen, argon
and other gases to various industries, raised its full-year profit
forecast in October. Peter McCausland, its founder and chief
executive, took back control of the company's chairmanship last
year after rival Air Products helped install a new chairman during
a hostile takeover bid. Air Products eventually withdrew its $5.9
billion offer.
Dow Chemical Co. (DOW) - reports Feb. 2
Wall Street Expectations: Dow Chemical is expected to have
earned 30 cents a share on $14.19 billion in revenue for the fourth
quarter. A year earlier, it reported a profit of 37 cents a share
on revenue of $13.77 billion. Excluding restructuring charges and
other items, earnings a year earlier were 47 cents a share.
Key Issues: The largest U.S. chemicals company by revenue has
seen its income soar in recent quarters as the company continues to
shift away from business in lower-margin commodities. Stronger
demand in emerging markets and price increases also have aided Dow
Chemical, which makes chemicals used in items ranging from diapers
to auto industry products. In November, the company officially
formed its joint venture Sadara Chemical Co. with Saudi Arabian Oil
Co., also known as Saudi Aramco. The venture plans to build and
operate one of the world's largest chemical plants on oil-rich
kingdom Saudi Arabia's Persian Gulf coast. Production is expected
to begin in 2015, and all units should be up and running by
2016.
(The Thomson Reuters financial estimates and year-earlier
figures may not be comparable due to one-time items and other
adjustments.)
-By Ben Fox Rubin, Dow Jones Newswires; 212-416-3108;
ben.rubin@dowjones.com
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