EARNINGS WRAP: Major US petchems post strong Q1 amid talk of capacity expansions

(Editor’s note: With the first-quarter earnings season nearing its close, HP is recapping the results from major market players in various segments. This is the first in that series.)

US petrochemical and specialty chemical producers enjoyed strong results to start 2011, with most firms posting significant year-on-year profit gains as higher sales and pricing offset rising feedstock costs.

While demand did recover in 2010, chemical companies saw their profit gains challenged by higher feedstocks, particularly from crude oil and olefins such as ethylene and propylene.

But thus far in 2011, North American producers have begun to reap the benefits of additional natural gas liquids (NGL) supply from the various shale plays.

That has allowed growth to continue. Moreover, in several cases, it has prompted consideration for expansions or even building new US capacity.

Here’s a rundown of how several top firms performed.

Dow Chemical
posted a first-quarter net profit of $721mn, up 30.6% year on year amid stronger volumes and a 12% jump in overall prices.

That jump in prices more than offset a $700mn increase in purchased feedstock and energy costs, the US-based producer said.

Sales increased 9.8% to $14.7 billion as volumes jumped 8% year on year, driven by gains across all geographic areas and operating segments.

Volumes were particularly strong in Dow’s health and agricultural sciences business, where they increased 14%, as well as in electronic and specialty materials, which grew by 11%.

“Our focus on execution was clear as we drove significant sales increases across all geographies and all operating segments through rigorous price and volume discipline,” said CEO Andrew Liveris.

Dow has now achieved eight consecutive quarters of margin growth, he added.

Looking forward, Dow said demand would continue to be strong in emerging regions, as a rising middle class and ongoing infrastructure investments are likely to offset inflationary concerns.

However, the US is expected to be strong as well, with the company announcing plans to build new ethylene and propylene capacity in coming years.

Likewise, petrochemicals major LyondellBasell saw its first-quarter net income surge to $660mn, up from $8mn in the same period of 2010 as sales increased and margins expanded.

Sales were $12.3bn, up by 26% year on year, while earnings before interest, tax, depreciation and amortization (EBITDA) more than doubled.

“During the first quarter, we again demonstrated the earnings potential of our company as margins increased in newly all businesses compared to the fourth quarter 2010, despite significant raw material pricing pressures,” said LyondellBasell CEO Jim Gallogly.

Like Dow, Lyondell said it was expanding its ethylene output and was considering a new US cracker.

continued the positive trend, posting earnings from downstream operations of $442mn – up from $82mn in the same quarter a year earlier.

The company cited improved margins for refined products and higher profits from its Chevron Phillips Chemical (CPChem) joint venture.

ConocoPhillips, Chevron’s partner in that joint venture, reported that its first-quarter chemical earnings rose 75% year on year to $193mn.

During the quarter, CPChem said it was conducting a feasibility study regarding the building of a world-scale ethane cracker in the US Gulf region.

On the specialty side, DuPont posted a first-quarter profit of $1.43 billion, up by 27% year on year on higher sales volumes and selling prices.

Consolidated net sales grew by 18% to $10 billion, led by 30% growth from sales in developing markets.

Volumes were up by 9% and local prices by 8%, the US chemical major reported.

DuPont said volumes were particularly strong within its safety and precaution, agriculture and nutrition and electronics and communications segments.

Also in specialty, Eastman Chemical posted a first-quarter profit of $220mn, more than doubling the $101mn it made in the 2010 first quarter.

Sales were $1.75 billion, up 28% year on year.

“We grew volume year over year in very business segments and in every region of the world,” said CEO Jim Rogers.

The positive first-quarter report followed the company’s $615mn divestment of its US polyethylene terephthalate (PET) business to DAK Americas, Eastman noted.

Stay tuned to the HPInformer blog over the next week for similar earnings recaps of the refining and construction segments.

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