Materials
Specialty Chemicals
$10.27B
14K
Eastman Chemical Company operates as a specialty materials company in the United States, China, and internationally. The company’s Additives & Functional Products segment offers amine derivative-based building blocks, intermediates for surfactants, metam-based soil fumigants, and organic acid-based solutions; specialty coalescent and solvents, paint additives, and specialty polymers; and heat transfer and aviation fluids. It serves transportation, personal care, wellness, food, feed, agriculture, building and construction, water treatment, energy, consumables, durables, and electronics markets. Its Advanced Materials segment provides copolyesters, cellulosic biopolymers, cellulose esters, polyvinyl butyral sheets, and window and protective films for value-added end uses in the transportation, durables, electronics, building and construction, medical and pharma, and consumables markets. The company’s Chemical Intermediates segment offers olefin and acetyl derivatives, ethylene, and commodity solvents; and primary non-phthalate and phthalate plasticizers, and niche non-phthalate plasticizers for industrial chemicals and processing, building and construction, health and wellness, and food and feed. Its Fibers segment provides cellulose acetate tow, triacetin, cellulose acetate flake, acetic acid, and acetic anhydride for use in filtration media primarily cigarette filters; natural and solution dyed acetate yarns, and staple fiber for use in consumables, and health and wellness markets; and wet-laid nonwoven media, specialty and engineered papers, and cellulose acetate fibers for transportation, industrial, agriculture and mining, and aerospace markets. The company was founded in 1920 and is headquartered in Kingsport, Tennessee.
Key insights and themes extracted from this filing
The 10-K reports a decrease in sales revenue from $10.58 billion in 2022 to $9.21 billion in 2023, attributed to reduced demand and customer destocking across key end-markets. While pricing actions were taken, they did not fully offset the volume decline.
The 10-K indicates that Earnings Before Interest and Taxes (EBIT) excluding non-core and unusual items decreased from $1.339 billion in 2022 to $1.097 billion in 2023. This decline is primarily due to lower sales volume and higher manufacturing costs.
Net cash provided by operating activities increased from $975 million in 2022 to $1.374 billion in 2023, primarily due to lower working capital, lower variable compensation payout, and lower pension and other postretirement contributions in excess of expenses.
Eastman leverages world class scalable technology platforms, delivering differentiated application development capabilities, and relentlessly engaging the market. Molecular recycling technologies continue to be an area of investment focus for the Company and extends the level of differentiation afforded by its world class technology platforms.
In 2023, the Company completed the sale of its operations located in Texas City, Texas, excluding its plasticizer operations. The total estimated consideration, after estimates of post-closing adjustments, was $498 million.
The AM segment completed the acquisition of Ai-Red Technology (Dalian) Co., Ltd., a manufacturer and supplier of paint protection and window film for the auto market in the Asia Pacific region for approximately $75 million, net of cash acquired, which is expected to enhance continued global growth of the AM segment performance films product line.
To mitigate the effects of these and other supply chain disruptions, the Company has implemented multifaceted sourcing, warehousing, and delivery strategies to focus on building resilient and redundant supply positions, and minimizing disruptions to customers by using alternate shipping methods to expedite delivery times.
To maintain and enhance its status as a low-cost producer and optimize earnings, the CI segment continuously focuses on cost control, operational efficiency, and capacity utilization.
In 2023, the Company moved the functional amines product line from the CI segment into the AFP segment. In addition, certain organic acid products and olefin-based products moved from the AFP segment to the CI segment. These product moves are expected to increase efficiency of the Company's assets and commercial teams, and to increase portfolio transparency.
Similarly, as a company which operates and sells products worldwide, uncertainty in the global economy, labor market, and capital markets (including impacts from inflation, higher interest rates, and subsequent changes and disruptions in business, political, and economic conditions) have impacted and may adversely impact demand for and the costs of certain Eastman products and accordingly results of operations.
The cost and availability of these raw materials and energy commodities can be adversely impacted by factors such as business and economic conditions, anomalous severe weather events, natural disasters, global pandemics, plant interruptions, supply chain and transportation disruptions, changes in laws or regulations, levels of unemployment and inflation, currency exchange rates, higher interest rates, war or other outbreak of hostilities or terrorism.
Despite the Company's efforts to mitigate cybersecurity risk, its business may be impacted by system shutdowns, service disruptions, or cybersecurity incidents. Such an incident could result in unauthorized access or disclosure of confidential or personal information, and loss of trade secrets and intellectual property.
The segment principally competes on differentiated technology and application development capabilities. Management believes the AM segment's competitive advantages also include long-term customer relationships, vertical integration and scale in manufacturing, and leading market positions.
The Company's strategy will also focus on organic growth initiatives and targeted bolt-on acquisitions.
Through a highly skilled and specialized sales force that is capable of providing differentiated product solutions, Eastman strives to be the preferred supplier in the Company's targeted markets.
To maintain and enhance its status as a low-cost producer and optimize earnings, the CI segment continuously focuses on cost control, operational efficiency, and capacity utilization.
To mitigate the effects of these and other supply chain disruptions, the Company has implemented multifaceted sourcing, warehousing, and delivery strategies to focus on building resilient and redundant supply positions, and minimizing disruptions to customers by using alternate shipping methods to expedite delivery times.
In 2023, the Company moved the functional amines product line from the CI segment into the AFP segment. In addition, certain organic acid products and olefin-based products moved from the AFP segment to the CI segment. These product moves are expected to increase efficiency of the Company's assets and commercial teams, and to increase portfolio transparency.
Eastman uses an innovation-driven growth model which consists of leveraging world class scalable technology platforms, delivering differentiated application development capabilities, and relentlessly engaging the market.
Molecular recycling technologies continue to be an area of investment focus for the Company and extends the level of differentiation afforded by its world class technology platforms.
invested in additional capabilities of Eastapure™ electronic solvents for use in manufacturing of semiconductor chips and other electronic applications with extremely low organic and inorganic impurities.
The Company employs a disciplined and balanced approach to capital allocation and deployment of cash. The priorities for uses of available cash include paying the quarterly dividend, funding targeted growth opportunities, repurchasing shares, and repaying net debt.
During 2023, the Company repurchased 1,866,866 shares of common stock for $150 million. Both dividends and share repurchases are key strategies employed by the Company to return value to its stockholders.
The Company expects that 2024 capital spending will be less than $800 million, primarily for targeted growth initiatives, including the AM segment methanolysis plastic-to-plastic molecular recycling manufacturing facilities, and site modernization projects.
Central to Eastman's innovation-driven growth model is management's dedication to enhance the quality of life in a material way with an ongoing commitment to sustainability.
Eastman has committed to reduce its absolute scope 1 (direct GHG emissions occurring from sources that are owned by Eastman) and scope 2 (indirect GHG associated with the purchase of electricity, steam, heat, or cooling and are a result of Eastman's energy use) emissions by approximately one-third by 2030.
Eastman focuses on the triple challenge of Climate, Circularity, and Caring for Society. Examples of Eastman sustainable solutions within identified disruptive macro trends include:
Eastman is exposed to consumer discretionary end-markets and changes in global consumer spending, particularly in the AM and AFP segments.
The coatings additives product line of the AFP segment and the intermediates product line of the CI segment are impacted by the cyclicality of key end products and markets.
Supply and demand dynamics determine profitability at different stages of business cycles, and global economic conditions affect the length of each cycle.