Eastman Chemical Co. (EMN) acquired Scandiflex do Brasil SA Industrias Quimicas for an undisclosed amount to expand its plasticizer business in Latin America. The Brazilian company manufactures materials used to produce pliable plastic.
The acquired Scandiflex plasticizer business and manufacturing capabilities will be a part of Eastman’s Performance Chemicals and Intermediates (PCI) segment.
In 2010, the acquired company reported net sales of $54 million.
Earlier last month, Eastman also completed the acquisition of petrochemical company Sterling Chemicals Inc. for $100 million in cash. The deal is expected to be accretive to 2011 earnings per share. The transaction, which includes Sterling’s plasticizer and acetic acid manufacturing assets in Texas City, Texas, is expected to be accretive to Eastman’s full-year 2012 earnings per share in excess of its cost of capital.
Recently, the company declared its results for the second quarter of 2011. The company reported second-quarter earnings of $2.76 per share compared with $1.95 per share a year earlier, beating the Zacks Consensus Estimate of $2.60 per share.
Sales improved across all product lines and revenues climbed 26% year over year to $1.9 billion, driven by higher sales volume and increased selling prices, outpacing the Zacks Consensus Estimate of $1.8 billion.
The higher sales volume was primarily attributed to growth in plasticizer product lines, increased demand for acetyl chemicals, the fourth quarter 2010 restart of a previously idled olefins cracking unit at the Texas facility, and stronger end-market demand, especially in the packaging, transportation, and durable goods markets. The increase in selling prices resulted from higher raw material and energy costs.
Based on the strong first half 2011 results, the company expects to continue to deliver earnings growth in the second half of 2011.
The results for the second quarter were driven by strong sales volumes and higher prices and Eastman expects the trend to continue into the third quarter as well. It expects to incur costs related to planned and unplanned shutdowns that are expected to be approximately $25 million higher in the second half of 2011 compared with the first half.
Even with these higher costs, Eastman anticipates third-quarter 2011 earnings per share to be slightly higher than third-quarter 2010 earnings per share of $2.22 and expects full-year 2011 earnings per share to be slightly higher than $9.25.
Eastman Chemical’s diversified chemical portfolio, along with its integrated and diverse downstream businesses, is driving earnings. Eastman benefits from business restructuring and cost-cutting measures. The company has sold unprofitable units and closed down poorly performing ones.
The company, however, faces volatility in raw material and energy costs, higher pension expenses and other growth-related costs.
Eastman competes with large multinational companies, such as Celanese Corp. (CE) and The Dow Chemical Co. (DOW) and EI DuPont de Nemours & Co. (DD).
Currently, Eastman has a short-term (1 to 3 months) Zacks #3 Rank (Hold) and a long-term (6 months and higher) Outperform recommendation.
