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Chemical industry weekly news roundup, 25 July
10:16 AM MDT | July 25, 2014 | By LINDSAY FROST
This Week in CW:
Earnings season is in full swing as several companies reported results this week. BASF reported a 12.3% increase in second-quarter net income, to €1.3 billion ($1.7 billion), on 0.6% higher sales, €18.5 billion. Dow Chemical's second-quarter results beat estimates as margins improved in its performance plastics segment and sales increased across all of the company's business segments. Dow reports second-quarter net income of $882 million, down 62.3% year-on-year (YOY). The 2013 quarter included $2.2-billion in proceeds from the K-Dow arbitration resolution. Also, a rally in Dow’s share price, helped by the strong second-quarter earnings report, has put the company in a position to convert $4 billion in preferred shares that carry an expensive $340-million/year dividend. DuPont reports net income of $1.1 billion, up 0.4% year-on-year (YOY). Consolidated net sales were $9.7 billion, down 1% YOY. AkzoNobel reported higher second-quarter profits and confirmed its outlook for 2015. Net income was up 11%, to €205 million ($276 million), with Ebitda advancing 7%, to €509 million. Praxair posted second net income of $467 million, up 5% year-over year (YOY). Reported earnings of $1.58/share were up 5% YOY but 1 ct below analyst estimates as reported by Thomson Reuters (New York).
The Galveston County Economic Alliance announced on Tuesday that Fund Connell USA Energy and Chemical Investment Corp. is exploring plans to build a large methanol production and export facility at Shoal Point, Texas City. The announcement was made by the investment partners of Fund Energy, the investment division of Sino Life Insurance Co. and the Connell Group, both of China. Fund Connell USA Energy and Chemical Investment says it has initiated engineering pre-design and feasibility studies for this project with the goal of making a final investment location decision during the second quarter of 2015. Engineering and construction firms SNC-Lavalin Group (Montreal, Canada) and Kentz Corp (St Helier, Jersey, Channel Islands) have announced an agreement for SNC-Lavalin to buy Kentz for £1.164 billion ($2 billion) in cash. The directors of Kentz, who have been advised by Investec, intend unanimously to recommend that Kentz shareholders vote in favor of the acquisition. The complex at full capacity could produce up to 7.2 million m.t./year of methanol for export to China in a new fleet of Post Panamax tankers.
ACC released its monthly chemical production regional index (CPRI). Following an upwardly revised 0.5% production gain in May, the US CPRI rose 0.3% in June, with output up in all regions. Year-over-year (YOY) through June, total chemical production in all regions was up 1.3%, following a revised 1.4% gain in May. On a 3-month moving average (3MMA) basis, overall chemical production was mixed.
Around the Web:
According to Industrial Distribution news, US home construction fell in June to the slowest pace in nine months, a setback to hopes that housing is regaining momentum and will boost economic growth this year. Construction fell 9.3% last month to a seasonally adjusted annual rate of 893,000 homes, the Commerce Department said Thursday. That was the slowest pace since last September and followed a 7.3% drop in May, a decline even worse than initially reported. Applications for building permits, considered a good indicator of future activity, were also down in June, dropping 4.2% to a rate of 963,000 after a 5.1% decline in May.
Fattening profit margins continue to be the dominant driver of earnings growth, according to Business Insider. Ever since the financial crisis, sales growth has been weak. However, corporations have been able to deliver robust earnings growth by fattening profit margins. Much of this has been done by laying off workers and squeezing more productivity out of those on the payroll.
Reuters says the number of Americans filing new claims for unemployment benefits fell to the lowest level in nearly 8-1/2 years last week, suggesting the labor market recovery was gaining traction. While another report on Thursday showed a sharp decline in new homes sales in June, economists cautioned against reading too much into the drop, noting that other data have pointed to housing getting back on track after stalling in late 2013.