Commodity earnings, margins reflect productivity gains

22:47 PM | April 28, 2014 | —CW Staff

North American commodity chemical producers report a solid first quarter despite some weather-related impacts. Productivity gains are a frequent theme.

Dow Chemical reports stronger first-quarter profits, driven by gains in most segments as well as productivity and cost-control actions. Adjusted earnings of 79 cts/share increased 14% year-on-year (YOY), easily beating the analysts’ consensus estimate of 70 cts/share. Sales increased 1% YOY, to $14.5 billion. Net income increased 75% YOY, to $964 million.

Sales in emerging geographies grew 3% YOY on an adjusted basis and led by a 7% volume expansion in Greater China. In North America, higher prices were offset by lower volume, reflecting weather- and transportation-related impacts. Sales in Western Europe increased slightly on volume growth of 2% YOY.

“Looking forward, we expect a global operating environment of continued slow growth and volatility,” says Dow chairman and CEO Andrew Liveris. “As 2014 unfolds, our actions to generate margin improvement will gain further momentum—evidenced again by our sixth consecutive quarter of year-over-year earnings growth. All of our key investments remain on track—especially Sadara and our [propane dehydrogenation] unit in Texas—and are expected to deliver increased earnings beginning in 2015.”

Praxair reports first-quarter net income of $448 million, up 8% YOY. Reported earnings of $1.51/share were in line with analyst consensus. Sales increased 5% YOY, to $3.03 billion, driven by higher on-site volumes from new project start-ups in North America and Asia. Sales growth was strongest in the energy, chemicals, and food and beverage end markets, the company says.

“Praxair delivered solid results in the first quarter, with sales growth of 9% and operating profit growth of 12% excluding the impact of currency,” says Praxair chairman and CEO Steve Angel. “We expect base volumes for the remainder of 2014 to continue to reflect modest growth in line with the current macroeconomic environment.”

Air Products reports net income of $284 million for the quarter, down 2% YOY. Earnings of $1.32/share fell below analyst estimates of $1.35/share. Sales of $2.6 billion were up 4% YOY, driven by higher energy cost pass-through and stronger underlying volumes in the merchant gases and electronics and performance materials segments, the company says.

Looking forward, the company expects June quarter earnings to be $1.42–1.47/share. “Air Products’ momentum will continue to increase as we load assets, win new business, and bring projects onstream,” says John McGlade, chairman and CEO of Air Products.

Celanese reports net earnings of $195 million for the first quarter, up 37% YOY. Adjusted earnings increased 16% YOY and 28% sequentially, to $1.33/share, beating the analysts’ consensus estimate of $1.21.

“Celanese [has] started the year with record first-quarter adjusted earnings,” says Mark Rohr, chairman and CEO. “Our focus on delivering value-added applications to our customers combined with strong execution on productivity initiatives drove segment income margins to 17.7% for the quarter, a 90–basis point improvement YOY and a 260–basis point improvement sequentially,” he says. Celanese expects 2014 earnings growth of 12–14%.

PetroLogistics (Houston) reports strong sales and high volumes for the quarter. Soaring feedstock costs took a deep bite out of margins, but the company beat the analysts’ consensus of 33 cts/share, turning in earnings of 37 cts/share. Sales increased 5.4% YOY, to $220.0 million, says PetroLogistics, and volumes increased 7.3%, to 311 million lbs. However, the average propane price increased 51%, to 130.4 cts/gal, the result of an unusually cold winter, and the propane-to-propylene spread fell 28%, to 36.2 cts/lb.

A mixed bag
(sales and net income in millions)
Company Sales Change* Net Income Change*
Dow Chemical $14,500 1% $964 75%
Praxair 3,030 5 448 8
Air Products 2,600 4 284 -2
Celanese 1,705 6 195 37
PetroLogistics 220 5 47 -18
*Percent change from same prior-year quarter. Source: Company reports.