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Chemical Finance Digest, Aug. 1-5
August 8, 2011 | By VINCENT VALK
Topping the headlines this week, earnings continued to be strong despite economic uncertainty. FMC's net income was up 63%, while Solvay's profits rose 12%. Arkema reported its highest historical net income, while Toray rose its full-year earnings forecast. DSM's income rose slightly, Huntsman's was flat, and Dow Corning's fell 14%.
Looking at those earnings reports, you could be forgiven if you forgot about last week's market turmoil, notes CW editor-in-chief Robert Westervelt.
In M&A news, PPG has acquired a Columbian coatings firm and Eastman acquired a specialties business. Terms were disclosed in neither deal. Evonik's sale of its carbon black business to Rhone Capital was completed, while Yara sold its' stake in a Russian fertilizer maker to a businessman for $390 million.
On the debt front, FMC announced plans to refinance its credit agreement, raising the total available under the facility to $1.5 billion from $915 million and extending the maturity by four years. In equity news, Eastman announced a two-for-one stock split and an 11% dividend increase.
In macroeconomic news, the U.S. economy added 117,000 jobs in July, somewhat better than expected. However, "the report leaves recession risks still high," according to IHS Global Insight chief economist Nigel Gault. "The July jobs report was not as bad as May and June. That's about the best that we can say for it," Gault says. Further economic stimulus is probably needed, he adds, but such a move is "very unlikely," as stimulus is perceived to have failed.
Oh, and Standard & Poor's downgraded U.S. sovereign debt one notch on Friday, to AA+. The reaction in the markets today was a massive selloff….of stocks. Treasury yields actually fell, as investors fled to safety. As many observers have noted, the recent trouble in the stock market is probably due to continued economic weakness and not S&P's downgrade – and that weakness is unlikely to go away in the face of further austerity measures. But let's not get too depressed, and remember that S&P is also partly to blame for the 2008 financial crisis, as it lavished AAA ratings on risky mortgage backed securities.