KINGSPORT, Tenn. (WJHL) — Eastman Chemical Co. expects significantly lower third-quarter earnings than it previously forecast, citing declining product demand, logistics challenges and a longer-than-expected recovery time following the July 22 power outage at its main Kingsport plant.
The company now expects earnings for the quarter ending Sept. 30 to be about $2.00 per share, according to a Tuesday news release. That would be almost 20% lower than 2021’s third-quarter earnings of $2.46 per share. Eastman had previously forecast “solid growth” compared to last year’s third quarter and 23% lower than the $2.60 Wall Street analysts have been projecting.
CEO Mark Costa said markets for agriculture and personal care products remained “resilient,” other Eastman end markets — as well as the overall European and Asian markets — were seeing slowdowns since August. The slowing product markets included consumer durables and building and construction.
Costa also gave a nod to the July 22 malfunction that resulted in the release of ethylene glycol into the South Fork of the Holston River and iodine into the air. Eastman cut off power when the incident occurred and some restarting operations “impacted volume and product mix” and bit into the company’s ability to meet demand.
“(R)ecovery of our polymer lines from an electricity outage in July at our Kingsport facility took longer than expected,” Costa said in the release.
He said the other main factor in the changed outlook centered around difficulty getting some of Eastman’s high-value specialty products from its advanced materials segment to overseas end markets. That’s come from “an acceleration of marine logistics issues on the U.S. East Coast.”
Costa said Eastman plans to raise its prices in response to paying more for natural gas and is “implementing measures to control costs across the company.”
Still ahead and not accounted for in the outlook is the possibility of a rail worker strike in the U.S. The release mentions a recent rail embargo and a possible strike later in September.
If the company earns an adjusted $2.00 per share, it would reach $6.89 in adjusted EPS through three quarters.
Costa did not comment on the previous guidance of full-year earnings between $9.50 and $10 per share, but he did mention a commitment to shareholders.
“As we close a challenging third quarter, our commitment to our growth programs is unwavering,” he said. “Our investments have us well-positioned as a leading specialty materials company, underpinned by our leadership position in the circular economy.”
Eastman stock closed Monday at $94.87 per share, down 20.7% on the year. That compares to a 14.3% drop year-to-date in the S&P 500.