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Chemical industry weekly news roundup, 26 April
1:00 PM MDT | April 26, 2013 | By LINDSAY FROST
This week in CW:
This week’s earnings roundup includes several top players that have confirmed their 2013 outlooks. Today, BASF reported a 15% drop in first-quarter net income, to €1.45 billion ($1.89 billion), mostly because of special income from the divestment of its fertilizer business. The company also announced earlier in the week that it would be restructuring its performance products segment, resulting in 500 jobs cuts worldwide. However, the company reported a rise in sales on intensified demand for crop protection products. Crop protection and agriculture demand also helped lift Dow Chemical’s first-quarter earnings ahead of estimates. Net income is reported as $550 million, up 33.5% year-on-year on lower sales due to a drop in European volumes. Bayer has reported a “positive development” in its life sciences operations, comprising HealthCare and CropScience, in the first quarter but said that MaterialScience’s results were hampered by raw material costs, while LyondellBasell Industries has reported a 50% increase in net income, to $900 million, on record US olefin margins, the company says. ExxonMobil’s chemical segment had a 62% rise in earnings, to $1.1 billion, due to higher commodity margins. DuPont’s operating earnings slipped 6%, to $1.4 billion, as weaker titanium dioxide earnings more than offset strong gains in its agricultural segment.
In a $1.5-billion deal, Georgia-Pacific announced on Friday that it plans to acquire Buckeye Technologies, a specialty fibers producer based in Memphis, TN. Buckeye’s portfolio of specialty fibers includes chemical cellulose, which provides greater strength and heat stability to industrial rayon cord in high-performance tires and a richer finish to paints, lacquers, and nail polish. The transaction will result in Georgia-Pacific paying out about $37.50/share in cash, or $1.4 billion, a premium of 29% based on the average closing price of Buckeye's common stock over the last week.
Taminco, owned by private equity firm Apollo Management, completed its previously announced initial public offering of 15.8 million shares Tuesday at $15/share, raising $223.8 million after underwriting fees and discounts. The price was below the $18–20/share range indicated by Taminco earlier this month. Taminco says it intends to redeem debt with a portion of the proceeds from this offering. Shares are trading on the New York Stock Exchange under the ticker symbol TAM. Shares were trading at $14.80/share at noon Wednesday.
Around the Web:
According to a report the Department of Commerce released on Friday, The New York Times says that the American economy sped up in the first quarter this year, with output expanding at an annualized pace 2.5%. However, according to the article, economists were not very happy—partially because of the fact that the number came in below their forecasts of around 3%. While faster growth of any kind is welcome, much of the acceleration in GDP was probably the result of unusually slow growth at the end of 2012, when the economy grew at an annualized pace of just 0.4 %. Consumer spending rose in the first quarter at the fastest pace since the end of 2010, despite fears that the lapse of the temporary payroll tax holiday at the start of the year would hold back how much consumers were willing to spend. Gas prices have also fallen this quarter.
An article in New Republic discusses a different type of response to the Texas fertilizer plant explosion: instead of hiring more inspectors, make companies like West pay to regulate themselves. A study completed in the 1990s indicates that thousands of risk assessors, working with the insurance industry, already evaluate the risk management plans that companies must submit to EPA. The agency could simply have those third-party inspectors collect additional information for EPA and accept their reports in lieu of conducting their own inspections. The idea was already tested in Delaware and Pennsylvania comparing reports of insurance auditors and EPA investigators with remarkably similar results, the article says.
According to Reuters, a slump in commodities is sending slow ripples through the world economy. Lower airfares, cheaper food, and rising profit margins are among the benefits that should flow from tumbling oil and commodity prices—but only after a long lead time, Reuters notes. Having poured $400 billion into commodities over the past decade, many investors are now selling. Their confidence that risky assets could only float higher on a rising tide of cheap central bank money has crumbled as the global economy fails to respond to the stimulus.