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
Q1 2024 sales were $2.310B compared to $2.412B in Q1 2023, a decrease of 4%. This decline was primarily due to lower selling prices, partially offset by higher sales volume. Lower selling prices were attributed to lower raw material and energy prices and lower distribution prices.
Net earnings attributable to Eastman increased to $165 million in Q1 2024 from $134 million in Q1 2023. This increase occurred despite a slight decrease in sales revenue, indicating improved profitability.
Cash used in operating activities was $16 million in Q1 2024, compared to $2 million in Q1 2023. This increase was primarily due to higher variable compensation payout and higher hedging settlement losses, partially offset by lower working capital.
Eastman continues to leverage its innovation-driven growth model, focusing on world-class technology platforms, differentiated application development, and market engagement. Molecular recycling technologies are an area of investment focus.
Capital expenditures in Q1 2024 were primarily for the AM segment methanolysis plastic-to-plastic molecular recycling manufacturing facilities and other targeted growth initiatives and site modernization projects. The company expects 2024 capital expenditures to be between $700 million and $750 million.
Purchase obligations in the 2029 and beyond period decreased by approximately $1.5 billion as a result of exiting an agreement with a supplier after contract negotiations. Eastman had remaining debt and other commitments at March 31, 2024 totaling approximately $10.5 billion over a period of approximately 30 years.
Eastman continues to apply a proactive and disciplined approach to working capital management to optimize cash flow and enable a full range of capital allocation options. The company expects to continue utilizing off-balance sheet factoring programs to support operating cash flow.
The CEO and CFO concluded that as of March 31, 2024, the Company's disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed was accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
There has been no change in the Company's internal control over financial reporting that occurred during the first quarter of 2024 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
Eastman is exposed to market risks, including changes in foreign currency exchange rates, commodity pricing, and interest rates. The Company employs various strategies, including pricing, inventory management, and hedging, to manage these risks.
Eastman and its operations are parties to various lawsuits, claims, investigations, and proceedings. While the Company is unable to predict the outcome of these matters, it does not believe that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial position, results of operations, or cash flows.
There have been no material changes to the company's material known risk factors which could materially adversely affect the company, its business, financial condition, or results of operations.
Sales revenue in the Advanced Materials segment increased in first quarter 2024 compared to first quarter 2023 primarily due to higher sales volume partially offset by lower selling prices. Higher sales volume was the result of reduced levels of customer inventory destocking.
Sales revenue in the Additives & Functional Products segment decreased compared to first quarter 2023 primarily due to lower selling prices. Lower selling prices were primarily attributable to cost pass-through contracts.
Sales revenue in the Chemical Intermediates segment decreased compared to first quarter 2023 primarily due to lower selling prices. Lower selling prices were attributed to weak market conditions as well as lower raw material and energy prices.
Selling, general and administrative expenses remained unchanged in first quarter 2024 compared to first quarter 2023 as higher variable compensation costs were offset by lower spend due to cost reduction initiatives.
R&D expenses decreased in first quarter 2024 compared to first quarter 2023 primarily due to targeted cost reduction initiatives.
Sales revenue in Fibers segment increased compared to first quarter 2023 primarily due to higher sales volume in textiles and higher selling prices in acetate tow, driven by an increase in industry capacity utilization.
Eastman continues to leverage its innovation-driven growth model, focusing on world-class technology platforms, differentiated application development, and market engagement. Molecular recycling technologies are an area of investment focus.
Capital expenditures in Q1 2024 were primarily for the AM segment methanolysis plastic-to-plastic molecular recycling manufacturing facilities and other targeted growth initiatives and site modernization projects.
R&D expenses decreased in first quarter 2024 compared to first quarter 2023 primarily due to targeted cost reduction initiatives.
The company repaid $198 million in debentures and issued $750 million in new notes during the quarter. The company expects to use a combination of available cash and debt proceeds to repay the $43 million principal amount of 7.625% debentures due June 2024 and $700 million principal of 3.80% notes due March 2025.
No shares were repurchased during first quarter 2024 or 2023. As of March 31, 2024, a total of 8,601,749 shares have been repurchased under the 2021 authorization for $785 million.
Both dividends and share repurchases are key strategies employed by the Company to return value to its stockholders.
The Credit Facility includes sustainability-linked pricing terms, provides available liquidity for general corporate purposes, and supports commercial paper borrowings.
Net proceeds from the bond issuance were used to finance or refinance eligible green investment initiatives, which contribute to Eastman's environmental sustainability strategy (a green bond).
Certain Eastman manufacturing facilities generate hazardous and nonhazardous wastes, of which the treatment, storage, transportation, and disposal are regulated by various governmental agencies.
Sales revenue decreased in first quarter 2024 compared to first quarter 2023 primarily as a result of decreases in the CI and AFP segments, partially offset by increases in the Fibers and AM segments.
The economic factors that impact the nature, amount, timing, and uncertainty of revenue and cash flows vary among the Company's business operating segments and the geographical regions in which they operate.
Sales revenue decreased 4 percent in first quarter 2024 compared to first quarter 2023 primarily due to lower selling prices (down 7 percent), partially offset by higher sales volume (up 3 percent). Lower selling prices were particularly in the Europe, Middle East, and Africa region.