Chemical industry weekly roundup, 24 October
12:44 PM MDT | October 24, 2014 | By LINDSAY FROST
This Week in CW:
Earnings season was in full swing this week as companies continued to report third quarter results. BASF reported a slight increase in third-quarter Ebitda to €2.52 billion ($3.19 billion) compared with €2.49 billion in the year-earlier quarter. Earnings before interest and tax (Ebit) before special items were 8.9% higher at €1.84 billion but net income declined 4.8% to €1.04 billion. Sales rose 3.3% to €18.31 billion. A sharp rise in volumes in the natural gas trading business was mainly responsible for this growth. BASF is divesting this operation by the end of this year. Dow Chemical posted net income of $852 million, up 43% from the year-ago quarter, led by strong gains in performance materials, performance plastics, and electronic materials. Revenues were up 4.9%, to $14.4 billion. Reported adjusted earnings of 72 cts/share were up 44% YOY and 6.6% above the median analyst estimate as reported by Thomson Reuters. LyondellBasell reports third-quarter net income of $1.3 billion, up 48% YOY from $851 million. Sales totaled $12.1 billion, an 8% YOY increase. Air Liquide has reported that its third-quarter revenue was €3.8 billion ($4.81 billion), up 1% YOY on a reported basis and 4.3% YOY on a comparable basis. AkzoNobel reported a 32% rise in third-quarter net income, to €205.0 million ($262.9 million), on 2% lower sales of €3.69 billion. W.R. Grace reported third-quarter net income of $74.5 million, down 3% YOY on higher corporate and other expenses. Reported adjusted earnings of $1.07/share were down 8.5% YOY but surpassed analyst estimates of 95 cts/share, according to Thomson Reuters (New York). A. Schulman reported fiscal fourth-quarter net income of $15.2 million, compared with a net loss of $2.7 million in the year-ago quarter, on sales up 16.8% YOY, to $627.4 million.
The sharp drop in crude oil prices has increased near-term volatility, but will not stop ethylene margins from marching toward a peak over the next two years, Dow Chemical officials said on a third-quarter earnings conference call with analysts on Wednesday. Crude oil prices have dropped 30% since June, with West Texas Intermediate crude for November delivery trading at $82.81/bbl on 21 October. “Over the long term, our view on oil remains constructive,” says Howard Ungerleider, Dow CFO. “In the near term, however, the situation is volatile and we are well prepared to adapt as needed." While lower crude prices may compress margins for ethane-based crackers globally, even with crude oil at $80/bbl ethane-based crackers in the Americas maintain first- and second-quartile cost positions, Dow says.
Westlake says it will invest over $330 million to expand ethylene capacity at its facility in Lake Charles, LA, by 250 million lbs/year and to make other capital improvements. The company expects to complete the expansion in late 2015 or early 2016.Westlake currently has over 2.7 billion lbs/year of ethylene capacity at Lake Charles.
Christophe de Margerie, 63 and CEO of energy major Total, was killed at Moscow’s Vnukovo international airport Sunday evening when a business jet collided with a snow plow during takeoff. De Margerie was the only passenger in the Falcon 50 business jet apart from three crew members, who were also French citizens. The company has since named refining and chemicals president Patrick Pouyanné the new CEO.
Around the Web:
According to Reuters, oil prices resumed their deep downward march on Wednesday, with US crude again nearing $80/barrel after data showing a second big jump in weekly US crude stockpiles broke a brief period of tentative consolidation. After a day of mostly choppy back-and-forth trade, prices tumbled steadily throughout the afternoon as dealers absorbed data showing a much quicker than expected rise in US inventories and still-tame consumption. The rising US dollar and falling equity markets added pressure.
China's grip over the world's supply of rare-earth metals has weakened considerably—and the country can't hold the global economy hostage, as was once widely feared. Or at least so argues a new paper on the topic, written about on Vox.com. In a new working paper from the Council on Foreign Relations, former Pentagon advisor Eugene Gholz explains that a much-feared crisis never actually came to pass. Not long after China restricted exports, other countries quickly began producing their own rare earths—or finding ways to reduce their reliance on the metals. As a result, China's control of the market is much diminished today.
Study after study has shown that one mistake costs investors billions of dollars each year, yet investors keep making it. This mistake happens primarily because investors are emotional and overconfident, according to the Motley Fool. The article says that investors trade far too much—and often at the worst times. With stocks, people frequently get caught up in the hype surrounding a stock with a great story. They overlook the risks because they want the story to work out. When the stocks drop they sell, locking in their losses. Even with mutual funds, this remains true. Financial data firm Dalbar annually updates its quantitative analysis of investor behavior study, which shows how the average fund investor performed over various time periods in comparison to the markets. The findings don't change much year to year.
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