Eastman Investor Day Highlights Growth Expectations
KINGSPORT, Tenn. â€" March 1, 2011
â€" At its 2011 Investor Day, Eastman Chemical Company
(NYSE: EMN) chairman and CEO Jim Rogers and senior executives
discussed the companyâ€™s strategy for generating
â€œThe strategic shift we have made has led to an improvement in the companyâ€™s portfolio and has resulted in greater strength in our core businesses,â€ said Rogers.Â â€œIn 2010, we demonstrated a new level of earnings performance and we are expecting to build on that going forward. Even before putting our strong balance sheet to work, we project significant earnings per share growth through 2013 and beyond.â€
The company increased its expectation for 2011 earnings per share to approaching $8, and increased its first-quarter 2011 earnings per share expectation to approaching $2. In addition, the company expects the compound annual growth rate of its earnings per share from 2010 through 2013 to be greater than 10 percent. In 2013, the company expects earnings per share to approach $10 per share.
CASPI: Stable core business with opportunities to
Mark Costa, executive vice president, specialty polymers, coatings, and adhesives and chief marketing officer, described the companyâ€™s growth strategy for the coatings, adhesives, specialty polymers, and inks (CASPI) segment as primarily focused on leveraging its technology platforms to extend the core into higher-growth markets and applications. Current efforts have CASPI positioned to deliver sustainable earnings growth over the next several years, including an operating margin expected to be between 17 and 20 percent.
Specialty Plastics:Â Expected to deliver strong earnings growth
For Specialty Plastics, Costa said that the growth strategy remains on track with strong 2010 operating earnings primarily due to greater than 30 percent volume growth. Although there are some challenges in 2011 due to increasing raw material and energy costs and capacity constraints, Specialty Plastics earnings growth is expected to continue through 2013 and beyond due to growth in core copolyesters, expanding capacity for cellulose esters that are used in LCDs, and growth from its proprietary Eastman Tritanâ„¢ copolyester. Each of these platforms serves high-growth end-markets with products that deliver a unique value proposition and reflect Eastmanâ€™s emphasis on sustainability. The Specialty Plastics segment is expected to increase operating earnings by more than 50 percent in 2013 compared with 2010, with an operating margin between 10 and 15 percent.
PCI: Well-positioned to serve large and growing markets
With its improved market and cost position, Ron Lindsay, executive vice president, performance chemicals and intermediates and operations support, said that management expects Performance Chemicals and Intermediates (PCI) earnings growth of approximately 10 percent annually through 2013 and beyond, and that it will maintain operating margins in excess of 10 percent. Like Eastmanâ€™s other segments, PCI serves diverse end-markets, mainly with products that are olefin- and acetyl-based. Over the past five years, PCIâ€™s top product lines have established leadership positions in their geographic markets and accounted for approximately 50 percent of the segmentâ€™s total sales revenue and two-thirds of its operating earnings in 2010.Â
Fibers: Capacity expansions in Asia support growth
Lindsay, who will assume responsibility for the Fibers segment on June 1, said that Fibers continues to provide solid earnings for Eastman and had another very strong year in 2010. The segment, which generated more than three-quarters of its revenue from outside North America, reported year-over-year earnings growth in 2010 for the sixth year since 2004. Long-term acetate tow volume is growing 1-2 percent globally with the Asia Pacific region accounting for over 50 percent of global volume.Â
Eastman expects to strengthen its strategic position in Asia Pacific with the new South Korea fibers manufacturing facility, increasing the Companyâ€™s low-cost acetate tow capacity by 15 percent. In addition, Eastman announced plans for a new 30,000 metric ton acetate tow plant in Heifei, China, expected to be operational in mid-2013 in a joint venture with China National Tobacco Corporation. Acetate flake raw materials will be supplied to the new China acetate tow plant from the companyâ€™s Kingsport, Tennessee, manufacturing facility.
Technology: Extracting value from core engines and new opportunities
According to Greg Nelson, senior vice president and chief technology officer, the estimated net present value of projects in development is increasing for both business projects and the innovation pipeline. This is expected to result in significant value creation, with targeted operating earnings of current projects in both the core and innovation pipelines of approximately $450 million at maturity. Nelson described many new products that have been developed from the companyâ€™s core polyester and cellulosics technologies, including cellulose esters used in the LCD market and Eastman Tritanâ„¢ copolyester.Â
Nelson also described several specific projects that are in various stages in the innovation pipeline. One such project is the companyâ€™s breakthrough process technology for wood acetylation, which modifies wood to increase dimensional stability and durability and dramatically improves performance. The addressable market for acetylated wood is estimated at over $2 billion across a wide range of end-market applications.Â Construction of an acetylated wood market launch facility is now underway in Kingsport, Tennessee, to produce acetylated wood products for select test markets in the United States in 2012. Nelson also described Eastman Cerfisâ„¢ technology for wood finishing and Eastmanâ„¢ microfibers for the filtration and energy storage markets as emerging opportunities in the innovation pipeline.
Financial strength and discipline
According to Curt Espeland, senior vice president and chief financial officer, disciplined and balanced capital allocation will continue to differentiate Eastman.Â Espeland described a solid balance sheet, including funding capacity (combination of available cash and debt capacity) estimated to approach $1.5 billion. He also indicated that cash from operations is expected to more than fund organic growth initiatives, and that the company is proceeding with its joint venture and acquisition strategy. Espeland also affirmed the companyâ€™s commitment to returning cash to stockholders through a strong dividend, which was recently increased, and the continuing repurchase of shares under the recent additional $300 million authorization by the companyâ€™s Board of Directors. In addition, Espeland indicated the company expects its return on invested capital will be solidly above its cost of capital.
A webcast replay of the Investor Day presentations and the accompanying slides will be available at www.investors.eastman.com, Events & Presentations.
Forward-Looking Statements: This news release includes forward-looking statements concerning current plans and expectations for company and segment strategy and strategic position; company earnings per share; segment available manufacturing capacity, sales volumes, costs, operating earnings, and operating margins; company financial position, funding capacity, cash from operations, uses of available cash, and return on invested capital; a new acetate tow manufacturing plant joint venture in China; estimated future earnings from new products in development; and new acetylated wood, wood finishing, and microfibers innovation pipeline products and production and marketing of new acetylated wood products. Such expectations are based upon certain preliminary information, internal estimates, and management assumptions, expectations, and plans, and are subject to a number of risks and uncertainties inherent in projecting future conditions, events, and results. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions or expectations prove to be inaccurate or are unrealized. Important factors that could cause actual results to differ materially from such expectations are and will be detailed in the company's filings with the Securities and Exchange Commission, including the Form 10-K filed for 2010 available on the Eastman web site at www.eastman.comÂ in the Investors, SEC filings section.