EARNINGS PREVIEW: EU, China raise questions for chemical companies
By KRISTIN JONES
TAKING THE PULSE: As the European recession ground on in the first few months of the year, US chemical companies felt the pain. Some, like Dow Chemical, detailed their exposure to the slump in Europe's industrial demand. Dow said last month it would close plants and lay off 900 workers.
At the same time, emerging markets, the reliable heroes of so many companies' rebound from the recession, posed a different question: How slow can China's slowdown go? Macro observers will read the tea leaves in these reports.
On the bright side, the revving of the US auto industry and an uptick in American manufacturing means more demand for chemicals, and customers may finally be restocking, after scraping the dregs of their inventories.
COMPANIES TO WATCH:
DuPont - reports April 19
Wall Street Expectations: Analysts polled by Thomson Reuters predict a profit of $1.54 a share on revenue of $11.24 billion. A year earlier, DuPont posted per-share earnings of $1.52 on total revenue of $10.03 billion.
Key Issues: DuPont, a diversified US manufacturer, fell short of analysts' profit predictions in the fourth quarter and noted that customers were destocking--working through existing inventories rather than buying new products. In January, the company said it expected consumer electronics customers to continue to destock early in the year.
But a rebound in US auto making and other manufacturing in North America may give a bottom-line boost. The company has benefited from higher pricing, offsetting raw material expenses.
Air Products & Chemicals - reports April 24
Wall Street Expectations: Analysts expect a fiscal second-quarter profit of $1.38 a share on revenue of $2.51 billion. A year earlier, the company reported earnings of $1.39 a share, or $1.41 excluding charges tied to its failed takeover bid for rival Airgas, on revenue of $2.5 billion.
Key Issues: The specialty gas supplier and chemical maker has said it expects global economic conditions to continue to pressure second-quarter volumes and earnings, before growth in Asia and North America accelerates in the second half of the year. Emerging markets have been a key driver of growth for Air Products, offsetting weakness in Europe, but business in China seems to be falling short of expectations lately, Barclays analysts said last month.
In January, the company agreed to sell its European home-care business to Linde for 590 million ($750.7 million) as it focuses on its core gases business. The home-care business will count as discontinued operations in the second quarter.
Praxair - reports April 25
Wall Street Expectations: Praxair's profit is expected to be $1.36 a share on revenue of $2.83 billion. A year earlier, it posted a profit of $1.29 on revenue of $2.7 billion.
Key Issues: Praxair, the largest industrial gas company in the Americas, has benefited from sales growth in Asia and South America, as well as continued strength in its core North American markets. In the last year, the company has seen revenue growth across regions. However, a strong US dollar may weigh on first-quarter earnings, Praxair warned in January.
Dow Chemical - reports April 26
Wall Street Expectations: Dow Chemical is expected to report earnings of 58 cents a share on $14.95 billion in revenue for the first quarter. A year earlier, it reported a profit of 54 cents on revenue of $14.73 billion. Excluding acquisition costs and other items, earnings a year earlier were 82 cents a share.
Key Issues: A slump in the European economy has taken its toll on Dow Chemical after a year in which income and revenue soared. The biggest US chemicals company by revenue, Dow Chemical said earlier this month that it would cut roughly 1.7% of its global work force and close plants in Europe, North America and Latin America to control costs.
On a positive note, the maker of chemicals used in everything from diapers to electronics continues to benefit from strong demand in emerging markets, pricing increases, and cheap North American feedstock.
LyondellBasell - reports April 30
Wall Street Expectations: LyondellBasell is expected to earn $1.05 a share on revenue of $12.01 billion. A year earlier, it posted a profit of $1.15 a share on revenue of $12.25 billion.
Key Issues: The company, formed after the 2007 merger of Houston-based Lyondell and Rotterdam-based Basell, has seen better luck since it emerged from Chapter 11 bankruptcy in 2010. Fueled by cheap American ethane, the company has improved its operating results, controlled costs and won rating upgrades.
The plastics and chemicals company said in February that it expected activity in Europe and Asia to remain slow for some businesses, but US operations were strengthening.
(The Thomson Reuters financial estimates and year-earlier figures may not be comparable due to one-time items and other adjustments.)
Dow Jones Newswires