Trade war hit Eastman in third quarter

Hank Hayes • Updated Oct 25, 2019 at 9:12 AM

KINGSPORT — The trade war continues to impact Eastman's bottom line as the Kingsport-based global advanced materials and specialty additives company reported lower third quarter revenues and earnings on Thursday.

“In the third quarter, global economic conditions worsened as uncertainty related to trade issues escalated and impacted consumer discretionary markets such as transportation and consumer durables, which was somewhat offset by our innovation and market development efforts,” said Mark Costa, Eastman board chair and CEO. “We continue to make strong progress growing new business revenue from innovation and market development initiatives, particularly in the Advanced Materials segment. In addition, we remain focused on aggressively managing costs. We also delivered strong free cash flow, which is a priority for us in this difficult environment.”

The company reported $2.3 billion in revenue for the quarter, compared to $2.5 billion in 2018's third quarter. Earnings before interest and taxes was $367 million, compared to $517 million in 2018's third quarter. Adjusted earnings per diluted share was $1.94, compared to $2.34 in 2018's third quarter. Sales were down in all four operating segments.

On the bright side, the company generated $416 million of cash from operating activities, free cash flow of $306 million, and returned $160 million to stockholders with $85 million of dividends and $75 million of share repurchases. The company continues to expect to approach $1.1 billion of free cash flow (cash from operating activities less net capital expenditures) in 2019. Priorities for uses of available cash include payment of the quarterly dividend, repayment of debt, funding targeted growth initiatives and repurchasing shares.

Commenting on the outlook for full-year 2019, Costa said: “For the first nine months of the year, we’ve remained focused on what we can control in this difficult business climate. We have increased new business revenue from innovation, particularly in the Advanced Materials segment, as well as continued to aggressively manage costs. However, we have seen business conditions worsen due to global trade uncertainty and other macro factors. As a result, we are now expecting lower sales volume and lower capacity utilization in the fourth quarter. Taking all of this together, assuming the current economic conditions continue, we expect 2019 adjusted EPS (earnings per share) to be between $7.00 and $7.20 and free cash flow to approach $1.1 billion.”

Eastman stock closed at $75.05 per share on Thursday, up 0.23 from Wednesday.