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 company’s strategy for generating
significant growth.
“The strategic shift we have made has led to an
improvement in the company’s portfolio and has
resulted in greater strength in our core businesses,â€
said Rogers. “In 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
accelerate growth
Mark Costa, executive vice president, specialty polymers,
coatings, and adhesives and chief marketing officer, described the
company’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 Eastman’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
Eastman’s other segments, PCI serves diverse
end-markets, mainly with products that are olefin- and
acetyl-based. Over the past five years, PCI’s
top product lines have established leadership positions in their
geographic markets and accounted for approximately 50 percent of
the segment’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 Company’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
company’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 company’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
company’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. 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. 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 company’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
company’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.com in
the Investors, SEC filings section.
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