Business

Chemical earnings up, but still weak Although profits at major chemical companies soared 24% from last year, they were down slightly from the first quarter of 1981

William J. Storck and William F. Fallwell C&EN, New York

Chemicals in the second quarter looked good on the surface. Earnings at major U.S. chemical companies were up 24% from second-quarter 1980. Chemical earnings, excepting petrochemical earnings at oil com­panies, improved, as did chemical profits at the more diversified com­panies with an interest in chemi­cals.

However, in spite of a big earnings

increase on a year-to-year basis for the 40 largest U.S. chemical com­panies, their performance on a quar­ter-to-quarter basis is not so good. Earnings for the 40 companies were actually down about 1% from the first quarter of 1981. This is unusual be­cause second-quarter earnings are usually higher than those in the first quarter, and the drop this year indi­cates a certain amount of weakness in the chemical economy through the first half.

In fact, the quarter-to-quarter change this year is probably more significant than the change from the second quarter of 1980, which was much depressed as chemicals slid into last year's recession.

What second-quarter performance really means is that the chemical in­dustry recovery from the 1980 reces­sion has hit a plateau. Although fi­nancial results just out from chemical producers are the proof, they aren't

all that surprising. Ever since early spring, new orders have been soft and price rises increasingly in trouble. Interim government statistics have borne this out, showing flat ship­ments and production, gradually ris­ing inventories, and a reduced rate of price inflation.

Behind this pause is the same problem afflicting a great many U.S. industries: super-expensive credit. With interest rates close to all-time records, big-ticket products simply don't sell very easily—particularly automobiles and new houses, which use large quantities of chemicals. Even with its many specialty product lines, the chemical industry cannot escape some damage from pervasive weakness in the durables part of the general economy.

At the moment, industry thinking has changed reluctantly on the out­look for the rest of 1981. Whereas the conventional wisdom six months ago

Chemical industry leaders for second-quarter 1980 . . .

S a l · · Earnings*

Rank $ Millions Rank 1980

Rank $ Millions 1980

Profitability Earnings as % of s a l · *

Rank 1980

1 Du Pont 2 Dow Chemical 3 Union Carbide 4 Monsanto 5 W.R.Grace β Allied Corp. 7 Celanese 8 American Cyanamid 9 PPG Industries

10 B.F.Goodrich

$3929.0 3066.9 2674.9 1865.0 1687.1 1585.0 1002.0 900.0 892.9 828.5

1 2 3 5 4 6 8 7 9

10

Du Pont Union Carbide Dow Chemical W. R. Grace Monsanto Allied Corp. PPG Industries Texasgulf Diamond Shamrock Freeport-McMoRan

$262.0 193.4 160.0 99.4 93.8 87.0 64.0 57.6 55.8 43.3

1 3 2 4

20 5 9 6 7 8

Freeport-McMoR an Texasgulf Great Lakes Chemical International Flavors First Mississippi Nalco PetroIHe Lubrlzol Malllnckrodt Air Products

20.8% 20.7 13.6 12.6 12.5 11.9 10.0 8.4 8.0 7.2

1 2 3 4 9 6 8 5 9

11

. . . and for first-half 1981 Sat·»

Rank $ Millions Rank 1980

Earnings8

Rank $ Millions 1980

Profitability Earnings as % of salas

Rank 1980

1 Du Pont 2 Dow Chemical 3 Union Carbide 4 Monsanto 5 W.R.Grace 6 Allied Corp. 7 Celanese 8 American Cyanamid 9 PPG Industries 0 Diamond Shamrock

$7606.0 5963.8 5314.5 3756.0 3173.8 3167.0 1913.0 1787.0 1700.0 1623.8

1 2 3 4 5 6 8 7 9

11

Du Pont Union Carbide Dow Chemical Monsanto W. R. Grace Allied Corp. Texasgulf PPG Industries Diamond Shamrock Staufffer Chemical

$466.0 371.4 288.9 269.8 182.5 171.0 142.5 116.5 113.5 111.0

1 3 2 4 6 7 5 9 8

11

Texasgulf Freeport-McMoRan Great Lakes Chemical International Flavors Nalco Stauffer Chemical Petrollte First Mississippi Lubrizol Williams Cos.

22.3% 20.6 14.4 12.4 12.1 11.0 10.0 8.7 8.4 8.3

1 2 3 4 7

11 9

10 5

15 a After taxes. Not·: For 40 chemical companies listed on page 12.

10 C&EN Aug. 17, 1981

Chemical industry 1981 second-quarter results

Sales

• Sales up 15% from year ago

• Earnings jumped 24% 30

• Profit margins rose 20

• Production was up • Price increases slowed 10

% change from year-earlier quarter 40

Earnings % change from year-earlier quarter

1979 1980 1981 -20 *

1979 1980 1981

Profit margins After-tax earnings as % of sales 8

Production % change from year-earlier quarter

Prices % change from year-earlier quarter 201

1979 1980 1981 1979 1980 1981 1979 1980 1981

Chemical sales this year likely will top $100 billion, a 15% increase, whereas earnings will rise only 10%; profit margins will fall to 1977 levels

Annual sales $ Billions 120

Annual earnings $ Billions 7 |

1971 73 75 77 79 81e

Annual profit margins After tax earnings as % of sales 8

971 73 75 77 79 81e 1971 73 75 77 79 81α

V a C&EN estimates. Note: All sales, earnings, and profit margin data are based on the combined performance of the 40 chemical companies listed on page 12.

Aug. 17, 1981 C&EN 11

7

6

5

.1

10

10

5

0

-101

16

12

8 Ι

4

π I

7

6

5

Ο

6

5

4

3

2

1

Ο

100

80

60

40

20

0

40

30

20

10

0

-10

Business

Earnings gain for large companies outpaced that for smaller firms in

Du Pont Dow Chemicald

Union Carbide9

Monsanto W. R. Grace

Allied Corp. Celanese American Cyanamid PPG Industries B. F. Goodrich'

Diamond Shamrock Hercules Williams Cos. Rohm & Haas9

Olin

International Minerals Ethyl Corp.h

Air Products Staufffer Chemical Witco Chemical

Akzona | Pennwalt

Texasgulf1

Reichhold Chemicals1

Lubrizol

Freeport-McMoRan Thiokol Nalco Chemical First Mississippi Mallinckrodt

International Flavors Liquid Airk

H. B. Fuller Petrolite Crompton & Knowles

Stepan Chemical Loctite Essex Chemical Great Lakes Chemical Philip A. Hunt

Total 20 largest companies Total 20 other companies Grand total

SECOND-QUARTER 1981 Sales Earnings

($ millions)

$ 3,929.0 3,066.9 2,674.9 1,865.0 1,687.1

1,585.0 1,002.0

900.0 892.9 828.5

786.3 712.0 578.2 545.4 544.6

520.4 453.4 387.6 377.2 335.5

314.0 308.7 278.3 254.3 240.9

208.2 177.6 164.1 137.1 127.4

120.3 109.0 84.7 74.9 66.1

56.0 55.7 52.1 34.5 28.6

$23,671.9 $2,902.5

$26,574.4

$ 262.0 160.0 193.4 93.8 99.4

87.0 41.0 42.2 64.0 20.6

55.8 33.5 37.9 33.4 32.9

29.8 23.6 28.0 23.1 10.3

4.8 12.7 57.6

5.5 20.2

43.3 8.8

19.6 17.1 10.2

15.1 7.2 3.7 7.5 2.4

1.9 2.6 3.5 4.7 1.2

$1371.7 $249.6

$1621.3

Change Sales

14% 22 13 20 9

16 25 8

19 10

6 14

1 17 12

4 3 9 6

20

14 8

16 19

- 1

33 21 9

44 17

- 3 6

12 16 8

49 8

39 30

3

14% 23% 15%

from 1980 Earnings

5 1 % - 7 29

304 18

19 64 29 61

106

5 22

- 2 3 24 21

- 6 - 2

4 16

- 1 0

233 17

- 3 2586 - 3 2

2 16 11 94 13

- 2 1 13 32

9 14

31 - 5 7 150

19 - 4 3

28% 5%

24%

Profit margin* 1981 1980

6.8% 5.2 7.2 5.0 5.9

5.5 4.1 4.7 7.2 2.5

7.1 4.7 6.6 6.1 6.0

5.7 5.2 7.2 6.1 3.1

1.5 4.1

20.7 2.2 8.4

20.8 5.0

11.9 12.5 8.0

12.6 6.6 4.4

10.0 3.6

3.4 4.7 6.7

13.6 4.0

5.8% 8.6% 6.1%

5.1% 6.8 6.3 1.5 5.4

5.4 3.1 3.9 5.3 1.3

7.2 4.3 8.5 5.8 5.6

6.3 5.5 7.6 5.6 4.0

0.6 3.8

24.6 0.1

12.1

27.3 5.2

11.7 9.3 7.4

15.5 6.2 3.7

10.7 3.4

3.8 11.6 3.7

14.7 7.3

5.2% 10.1% 5.7%

second quarter

Sales FIRST-HALF 1981

Earnings ($ millions)

$ 7,606.0 5,963.8 5,314.5 3,756.0 3,173.8

3,167.0 1,913.0 1,787.0 1,700.0 1,608.9

1,623.8 1,380.0 1,073.9 1,024.1 1,066.3

1,083.4 878.6 800.6

1,006.5 659.1

622.9 603.7 553.6 493.1 465.1

432.8 350.1 320.9 201.3 248.7

243.7 218.6 162.8 145.8 126.0

105.6 112.3 92.0 69.3 54.7

$46,586.3 $5,623.0

$52,209.3

$ 466.0 288.9 371.4 269.8 182.5

171.0 77.0 89.3

116.5 29.0

113.5 69.0 89.5 58.2 61.3

76.8 44.1 64.9

111.0 16.2

7.5 15.3

142.5 9.5

39.1

89.0 17.0 38.7 17.5 20.3

30.2 16.4 6.7

14.5 4.2

3.0 5.6 4.4

10.0 1.3

$2765.9 $492.7

$3258.6

Change from 1980 Sales Earnings

8% 12 8

11 8

15 16 7

10 7

11 11 2

13 11

13 nc 9 7

17

16 4 6

10 nc

35 19 8

47 12

- 1 4

13 18 3

37 10 30 15 1

10% 15% 10%

12% - 2 8

nc 44 21

21 26 26 23

- 4

8 14 9 7

25

- 1 6 - 3

6 24

- 2 5

11 - 3 4 - 2 9 116

- 3 3

4 1

14 32 13

- 1 9 12 52 20

8

51 - 5 4 110

8 - 6 2

7% - 9 %

4%

a After-tax income as percentage of sales, b Fully diluted before nonrecurring items and extraordinary charges for operations, c As of July 31. d Excludes nonrecurring gain of $21 million in second-quarter 1981. e Excludes $217.3 million nonrecurring gain in first-quarter 1980. f Excludes nonrecurring gain of $18 mi llion in first-half 1981. g Excludes $13.4 million charge in

called for a slow first half followed by a marked pickup in the second, the consensus now is that the entire year could turn out in the doldrums. Cer­tainly, no fresh wind has blown in for the third quarter.

This lag will have some important consequences. Most generally, the chemical industry's new business cycle, starting with expansion, is be­

hind schedule by at least half a year. That will upset a lot of fairly rosy earnings forecasts for 1981. It also will keep the brakes on capital spending, the chemical industry's most impor­tant use of free-standing funds, de­spite the new incentives in legislation from Washington. It will not, appar­ently, affect the industry's big planned increase this year in R&D.

Combined earnings for the 40 companies were up 24% in the second quarter from a year earlier to $1.62 billion. Combined sales for the 40 companies topped $26.57 billion in the quarter, a gain of 15% from the same period a year ago. Profit mar­gins rose to an average 6.1% from 5.7% last year.

For the second straight quarter, the

12 C&EN Aug. 17, 1981

FIRST-HALF 1981 Profit margin* 1981 1980

6.2% 6.0% 4.8 7.5 7.0 7.5 7.2 5.6 5.8 5.1

5.4 5.1 4.0 3.7 5.0 4.2 6.9 6.1 1.8 2.0

7.0 7.2 5.0 4.8 8.3 7.8 5.7 6.0 5.7 5.1

7.1 9.5 5.0 5.2 8.1 8.3

11.0 9.5 2.5 3.8

1.2 1.3 2.5 4.0

22.3 33.7 1.9 1.0 8.4 12.5

20.6 26.8 4.8 5.8

12.1 11.4 8.7 9.7 8.2 8.2

12.4 15.2 7.5 6.9 4.1 3.0

10.0 9.8 3.3 3.2

2.8 2.6 5.0 12.0 4.8 3.0

14.4 15.3 2.4 6.4

5.9% 6.1% 9.0% 11.1% 6.2% 7.0%

12-MONTH RUNNING DATA

Change from 1980 Sales Earnings

7% 10 7 9

12

12 11 8 7 5

17 5 7

10 7

15 - 1 10 9

18

6 5

20 4 7

39 23 6

47 13

1 9

13 25

2

23 7

26 9

- 1

9% 13% 9%

- 1 3 % - 1 9

nc 17 15

46 10 15 12 6

- 8 nc 11 2

14

7 - 7

5 3

- 1 7

- 6 8 - 1 1

48 159

- 1 6

40 - 2 2

17 41 11

- 1 4 4

45 43 - 9

67 - 6 0 103

3 - 7 4

nc 15% 2%

Profit margin* 1981 1980

5.4% 5.7 6.3 4.8 4.9

5.6 3.8 5.0 6.9 1.9

5.9 4.9 6.5 5.4 4.4

7.7 5.1 7.8 8.1 2.8

0.5 3.4

27.9 2.3

10.0

21.2 4.3

12.1 8.3 8.1

12.6 6.8 3.9 9.9 3.1

3.5 4.9 4.6

14.6 1.9

5.4% 9.2% 5.8%

6.6% 7.8 6.7 4.5 4.8

4.3 3.9 4.7 6.6 1.9

7.4 5.2 6.3 5.9 4.1

8.3 5.4 8.2 8.5 4.0

2.4 4.1

22.7 0.9

12.7

21.1 6.7

11.0 8.7 8.2

14.8 7.1 3.0 8.7 3.6

2.6 13.0 2.8

15.4 7.1

5.9% 9.0% 6.2%

Earnings per share0

Recent 2nd qtr 12 months

$1.67 0.84 2.86 2.32 2.05

2.40 2.39 0.88 1.91 1.03

1.00 0.76 1.27 3.14 1.37

1.09 1.19 0.98 0.52 1.05

0.39 1.23 1.60 0.69 0.51

0.63 0.76 0.97 0.80 0.69

0.42 0.68 0.81 0.63 0.72

1.00 0.26 0.94 0.65 0.20

$5.06 3.68

10.43 8.98 6.60

9.^4 8.73 3.88 6.94 4.22

3.42 2.91 5.18 8.32 3.63

6.13 4.36 4.23 3.25 3.69

0.46 3.91 7.32 2.64 4.21

3.69 2.67 3.84 1.65 3.53

1.99 2.29 2.65 3.97 3.02

2.51 1.05 2.58 2.76 0.34

July 31

451/2

311/4

561/4

74 481/8

53% 631/2

3oy4

44V2

241/2

34V2

24Ve 287e 651/4

23%

42V2

267e 371/4

24 28 %

13% 28% 531/8

13% 261/2

321/2

317/8

49% 18% 33%

19% 221/4

24% 33% 17%

34% 241/4

20 47%

9%

STOCK MARKET DATA0

Stock price P r | c e «arn-Recent 12 months ings ratio High Low July 31

56 36 9 39 30% 8 62% 43 5 87% 501/4 12 63% 41% 7

6 1 % 46% 7 691/4 48% 7 36% 26 8 581/4 32% 6 28% 20% 6

39% 27% 10 26% 18 8 49% 25% 6 71% 45% 9 27 17% 7

66% 38% 7 36% 25% 6 591/4 36% 9 27% 17% 7 33% 26 10

151/2 10 30 36 25% 8 577/8 191/4 7 16 11 5 41% 24% 6

40% 29% 9 39 25% 12 581/4 381/8 13 30% 151/4 11 41% 23% 10

27% 17% 12 341/2 221/4 10 24% 11% 9 44% 31 9 18% 11% 8

43% 16% 14 38 23 23 201/4 11% 8 581/2 39 17 131/2 8% 45

Annual indicated dividend

$2.40 1.80 3.40 3.80 2.60

2.40 3.80 1.60 2.36 1.56

1.68 1.32 1.20 2.80 1.20

2.60 1.50 0.80 1.32 1.60

0.80 2.20 1.00 0.48 1.08

0.60 1.10 2.00 0.24 1.00

0.92 1.60 0.48 0.80 0.96

1.00 0.56 0.80 0.44 0.40

Dividend yield, % of price

5.3% 5.8 6.0 I 5.1 5.4

4.5 6.0 5.3 5.3 ! 6.4

4.9 5.5 4.2 4.3 5.1

6.1 5.6 2.1 5.5 5.7

5.8 7.8 1.9 3.5

4-1 i

1.8 3.5 4.8 1.3 3.0

4.8 7.2 2.0 2.4 5.4

2.9 2.3 4.0 0.9 4.3

second-quarter 1981 and $7.6 million nonrecurring gain in first-quarter 1981. h Excludes $6.8 million charge in second-quarter 1980 and nonrecurring gain of $7.3 million in first-quarter 1980. i Excludes $18.6 million nonrecurring gain in first-half 1981. | Excludes $2.4 million charge in second-quarter 1981. k Excludes $2 million gain in second-quarter 1980. nc = no change.

larger companies outperformed the smaller companies. The 20 biggest companies on the list had an earnings gain of 28% to $1.37 billion. This in­crease came on a sales gain of just 14% to $23.67 billion.

By way of contrast, the smaller companies on the list had a smaller earnings gain on a larger sales gain for the quarter. Earnings at the 20

smaller companies totaled nearly $250 million, a 5% gain from the sec­ond quarter last year. However, sales at the smaller companies increased 23% to a total of $2.90 billion.

The huge increase in earnings at the 40 chemical companies in the second quarter made the year-to-year change for the first half positive. After being off about 8% in the first quarter,

chemical company earnings improved an average of 4% for the first half. Earnings for the 40 companies in the first six months totaled $3.26 billion, compared with $3.12 billion in the first half of 1980. Sales for the 40 companies increased a much faster 10% to $52.21 billion in the first six months this year. The result was that profit margins were driven down to an

Aug. 17, 1981 C&EN 13

Business

Earnings are up at most chemical-producing oil and natural

Exxon Mobilb

Texacob

Standard Oil of California | Standard Oil (Ind.)

Gulf Oil Atlantic Richfield Shell Oil Conoco

1 Phillips Petroleum

Sun Co.b

Tenneco Getty Oil Occidental Petroleum

| Standard Oil (Ohio)

Union Oilb

Ashland Oil Cities Service5

El Paso Kerr-McGee

% Chemical sales

8% 4 3 3

11

10 8

16 5

14

3 12 2

21 4

10 14 7

14 14

SECOND-QUARTER 1981

Sales Earnings

($ millions)

$27,469.0 16,565.0 14,799.0 10,979.0 8,139.2

7,200.0 6,968.0 5,554.0 4,900.0 4,070.0

3,900.0 3,776.0 3,216.5 3,127.9 2,907.9

2,775.8 2,456.0 2,265.3 1,007.0

890.8

$1825.0 700.0 555.7 616.0 552.8

311.0 380.1 410.0 158.7 229.8

163.0 203.0 205.0 128.2 478.7

183.5 13.3 77.5 37.8 51.4

Change

Sales

5% 8

18 3

13

6 23 13 4

26

30 18 22

4 2

1 19 23 12 4

from 1980

Earnings

77% 2

10 15 1.3

- 3 4 - 1 3

1 - 3 6

7

- 3 3 9

- 1 6 - 2 0

6

- 6 - 7 1 - 2 8

62 4

gas companies

Profit

1981

6.6% 4.2 3.8 5.6 6.8

4.3 5.5 7.4 3.2 5.7

4.2 5.4 6.4 4.1

16.5

6.6 0.5 3.4 3.8 5.8

margin*

1980

3.9% 4.5 4.0 5.0 6.8

6.9 7.7 8.3 5.3 6.7

8.2 5.8 9.2 5.4

15.9

7.1 2.3 5.8 2.6 5.8

FIRST-HALF 198'

Sales Earnings ($ millions)

$57,792.0 33,709.0 30,258.4 22,967.0 15,992.3

15,074.0 14,100.4 10,967.0 10,300.0 8,300.0

7,900.0 7,585.0 6,511.2 6,507.5 6,027.2

5,442.3 4,607.3 4,564.5 2,008.0 1,806.9

$3425.0 1340.0 1213.7 1282.0 929.5

614.0 726.6 771.0 409.6 500.6

283.0 397.0 435.2 387.6 999.1

338.0 20.5

135.2 68.7 94.8

1 · After-tax income as percentage of sales.b Excludes major nonrecurring earnings: Mobil—$459 million first-quarter 1980; Texaco—$402 million in first-quarter 1980; Sun-I in second-quarter 1981; Union Oil—$24.4 million in second-quarter 1981; Cities Service—$13.0 million in second-quarter 1981.

I Change

from 1980

Sales

7% 10 17 9

17

4 27 13 14 26

30 16 33

3 10

6 14 13 16 11

-$135 million

Petrochemical earnings are still down

If overall chemical earnings are finally beginning to pull up, petrochemical earnings at oil and natural gas com­panies are doing their usual thing in lagging behind. The best that can be said is that petrochemicals didn't do as badly as in the previous three quarters. At a few of the better-performing petro­chemical operations, the second quarter brought signs of a turnaround. But for most firms, news from their chemical units was not good.

For six major U.S. oil companies supplying after-tax data, petrochemical earnings fell 18% in the second quarter from a year ago. This is less of a drop than the 55% decline for these com­panies in the first quarter (C&EN, May 11, page 17). As a result, first-half 1981

earnings for the group were down 38% from first-half 1980.

As in first-quarter reports, a large number of companies had things to say about chemical performance. Some comments have turned hopeful, but most are still negative. Shell Oil presi­dent John F. Bookout could be speaking for many other companies when he says, "We have not seen the turnaround in chemical product results which we had expected by this time. Significant improvement in this sector is highly dependent on the economy, particularly automobiles and housing, and we remain hopeful that business conditions for chemical products will improve later in the year."

At Exxon, the largest petrochemical

$ Militons

Conoco Exxon Mobil Shell Oil Standard Oil (Ind.) Texaco

TOTAL

1981

$ - 1 . 2 96.0 27.0 15.0 51.7 26.3

$214.8

AFTER-TAX Second quarter

1980

$ 18.2 107.0 26.0 54.0 46.1

9.1 $260.4

% Chang·

Deficit - 1 0 %

3 - 7 2

12 190

- 1 8 %

EARNINGS

1981

$ - 3 . 8 157.0 53.0 21.0 91.1 48.7

$367.0

First half 1980

$ 43.7 269.0 62.0 77.0

105.3 39.2

$596.2

% chang·

Deficit - 4 2 % - 1 4 - 7 3 - 1 4

24 - 3 8 %

producer, chairman C. C. Garvin Jr. fills in a few numbers behind the company's continuing profits drop. Although dollar sales in the first half of 1981 gained 3% from a year ago, physical sales volume was down 5% worldwide. Profit margins were lower for most product lines, in­fluenced by a combination of excess plant capacity and rising costs.

Some chemical units at oil com­panies are still in the red. For example, Conoco sustained a $1.2 million loss in the second quarter in contrast to an $18.2 million profit a year ago. For the first half, Conoco had a $3.8 million loss compared to a $43.7 million profit in 1980. The problem is caused by higher feedstock costs, sharply lower physical sales volume for petrochemicals, and competitive price pressures in plas­tics.

However, a few chemical operations in the oil industry turned in profit gains in the second quarter amid general opti­mism from management. For example, Standard Oil (Ind.) registered an after-tax profit pickup in chemicals of 12% in the second quarter from a year ago. Chair­man John E. Swearingen comments that prices in most chemical lines have re­mained strong enough to preserve profit margins despite declining demand in some lines.

14 C&EN Aug. 17, 1981

FIRST-HALF 1981

Change from 1980

Earnings

16% -13

10 10

- 1 3

- 2 9 - 1 6

- 1 - 2 9

0

- 4 3 9

- 7 - 1 2

11

4 - 7 8 - 5 1

30 - 2

Profit margin*

1981 1980

5.9% 4.0 4.0 5.6 5.8

4.1 5.2 7.0 4.0 6.0

3.6 5.2 6.7 6.0

16.6

6.2 0.4 3.0 3.4 5.3

5.5% 5.0 4.3 5.5 7.8

5.9 7.8 8.1 6.4 7.6

8.2 5.6 9.6 6.9

16.4

6.8 2.3 6.9 3.1 5.9

Earnings per share

Recent 2nd qtr 12 months

$2.11 1.65 2.09 1.80 1.90

1.59 1.51 1.33 1.54 1.51

1.30 1.50 2.49 1.47 1.94

1.06 0.14 0.93 0.79 1.98

$7.08 6.18 8.77 7.49 6.10

5.44 5.61 4.96 8.02 7.04

4.50 5.82

10.19 7.59 7.74

3.68 2.93 4.02 2.61 6.94

July 31

35 30% 361/4

421/2

60%

39% 50 45% 91 y4

431/2

40% 39 72% 27% 51

41 y4

36 54 26% 77%

STOCK MARKET DATA

Stock price

Recent 12 months High Low

44% 44% 54% 51% 99%

52% 74% 65% 91 % 62%

59% 58% 1081/4

39% 91%

56% 45% 62% 29% 93

32% 27% 33% 35% 49

30% 40% 34 47% 34%

31 % 36% 59 24% 42%

28 29% 31 % 19% 61%

Price-earn­ings ratio

July 31

5 5 4 6

10

7 9 9

11 6

9 7 7 4 7

11 12 13 10 11

Annual indicated dividend

$3.00 2.00 2.80 2.40 2.60

2.80 2.20 1.80 2.60 2.20

2,10 2.60 2.40 2.50 2.40

0.80 2.40 1.60 1.48 2.00

Dividend yield, % of price

8.6 6.5 7.7 5.6 4.3

7.1 4.4 3.9 2.8 5.1

5.2 6.7 3.3 9.1 4.7

1.9 6.7 3.0 5.6 2.6

average of 6.2% from 7.0% for the first half of 1980.

For the 20 larger companies, sales increased 10% over last year's first half to $46.59 billion. Earnings in­creased 7% to $2.77 billion. Profit margins at the 20 larger companies fell slightly to 5.9% in the first half of 1981 from 6.1% last year.

The smaller companies on the list fared worse, however. While sales were increasing 15% to $5.62 billion, earnings were falling. The 5% increase in earnings in the second quarter was not enough to pull the year-to-year change for the 20 smaller companies into the positive numbers after a 12% decline in the first quarter.

Earnings for this group in the first half were off 9% to almost $493 mil­lion. The result is a drop in profit margin to 9.0% in the first half of this year from 11.1% in the first six months of last year.

On the plus side, fibers continued the improvement that they started the fourth quarter of 1980. At Allied Corp. sales and income from nylon carpet fiber operations were sub­stantially higher than in last year's second quarter.

At Du Pont, fiber net income was $93 million in the second quarter, up 186% over the $32 million in net in­come for fibers in the second quarter

last year. Fibers contributed 35% of the company's earnings in the second three-month period this year. Fiber sales (worldwide) at Du Pont were $1.31 billion, an increase of 20% from second-quarter 1980.

Monsanto's fiber operations im­proved in the second quarter from a year ago, although they were not so good as they had been in the first quarter this year. Monsanto's fiber sales in the second quarter increased 11.2% from a year ago to $276.2 mil­lion.

Fiber operating income in this year's second quarter was $7.2 mil­lion, better by any standards than the $41.4 million loss Monsanto suffered in the second quarter of 1980. How­ever, the $7.2 million operating in­come was 58% lower than in this year's first quarter.

For the half, Monsanto fiber sales were $547 million, a 9.3% gain from the first half of 1980. Operating in­come for the half was $24.5 million, compared with a loss of $71.1 million in the first half a year ago.

At Celanese, fibers also performed well on a year-to-year basis, and un­like Monsanto, income from fibers in the second quarter showed good im­provement over that of the first.

Fiber income at Celanese in the second quarter was $1.15 per share,

an increase of 161% from second-quarter 1980. And the $1.15 per share was 69% ahead of fiber earnings in the first quarter this year.

Much of the improvement at Cel­anese was contributed by polyester, earnings from which in the second quarter amounted to 35 cents a share compared to a loss of 8 cents a share in the second quarter a year ago.

For the first half, Celanese fiber earnings were $1.18 per share, an in­crease of 118% over last year's first half. Again, polyester added to this; earnings from those operations in the first half improved to 42 cents a share from a loss of 17 cents a share in the first six months last year.

While earnings were improving in fibers, some other areas were not so fortunate. One of these in particular was phosphate fertilizers. At Williams Cos., Joseph H. Williams, chairman and chief executive officer says, "Agrico Chemical Co.'s nitrogen product prices and margins were good throughout the second quarter. However, phosphate product prices and margins declined as inventories increased. We are now curtailing phosphate production at two of our plants, which will adversely affect results for the third quarter and the year."

Freeport-McMoRan says that

Aug. 17, 1981 C&EN 15

Business

Earnings also improve at most diversified chemical producers

General Electric U.S. Steel Dart & Kraft Eastman Kodak 3M

Georgia-Pacific Aluminum Co. of America Borden Northwest Industries FMC

Kaiser Aluminum Martin Marietta Esmark Pfizer Merck

Borg-Warner NL Industries General Tire & Rubberb

Uniroyal Eli Lilly

Koppers Upjohn National Distillers Emhartb

Engelhardb

Cabot Vulcan Materials Big Three Industries Ferro GAF

1 a After-tax earnings as percentage 1 Engelhard—$5.2 million in second

% Chemical sales

4% 12 11 23 15

13 10 34

7 35

13 10 26 14 16

24 26 19 27 20

30 19 36 16 7

31 38 30 15 44

Sales SECOND-QUARTER 1981

Earnings Change

($ millions) Sales

$6950.0 3792.0 2608.2 2417.4 1664.0

1443.0 1304.6 1208.6 926.9 911.5

893.6 880.2 848.1 810.3 744.3

712.3 687.2 658.2 626.4 624.6

538.4 513.9 522.3 442.8 433.3

417.3 205.2 200.0 189.3 174.1

$436.0 12% 167.6 20 116.1 16 284.5 13 135.0 10

55.0 21 81.5 1 40.2 - 5 67.1 35 42.0 4

68.5 - 1 1 61.1 37 29.7 17 74.8 14

108.5 10

42.0 6 75.4 35 22.7 24 22.7 6 76.7 4

16.1 16 40.0 16 34.5 4 17.0 - 3 20.6 - 2 9

29.5 19 23.1 9 26.3 30

5.1 11 4.3 9

of sales, b Excludes major nonrecurring earnings: General Tire-quarter 1981. c Deficit in 1980. na = not available.

from 1980

Earnings

8% 50 16 19

- 1 4

0 - 4 5

2 112

7

- 1 7 4

62 15

- 2

33 90

229 c

3

- 1 8 - 1 3

18 1

24

29 18 29 10

191

Profit

1981

6.5% 4.4 4.5

11.8 8.1

3.8 6.3 3.3 7.2 4.6

7.7 6.9 3.5 9.2

14.6

5.9 11.0 3.5 3.6

12.3

3.0 7.8 6.6 3.9 4.8

7.1 11.3 13.2 2.7 2.8

margin*

Ï98Ô

6.5% 3.5 4.5

11.3 10.4

4.6 11.5 3.1 4.6 4.5

8.2 9.1 2.5 9.2

16.4

4.7 7.8 1.3

c

12.4

4.2 10.3 5.9 3.7 2.7

6.5 10.3 13.2 2.8 0.9

-$4.4 million charge in first-quarter 1981

FIRST-HALF 1981

Sales Earnings

($ millions)

$13,040.0 7,191.4 5,010.3 4,722.7 3,246.0

2,791.0 2,603.6 2,261.5 1,736.9 1,797.7

1,728.0 1,597.7 1,582.0 1,608.1 1,469.6

1,388.3 1,292.9 1,226.7 1,167.9 1,437.2

964.3 995.4

1,030.9 876.4

1,138.3

826.4 373.2 398.7 368.5 350.8

$795.0 438.5 212.6 533.6 277.7

107.0 182.6 72.4

118.7 83.4

136.6 100.8 41.3

139.5 220.3

76.6 135.0 29.2 30.3

201.5

12.4 92.2 68.8 21.4 35.7

60.3 37.2 52.4

9.6 7.4

Change from 1980

Sales

8% 14 10 11 8

15 0

- 4 29 3

- 5 32 17 11 11

3 27 18 0 9

11 14

- 2 - 3

- 3 1

9 4

30 8 9

; Emhart—$3.9 million in second-quarter 1980;

phosphate markets in the U.S. and abroad weakened late in the first half. The combined fallout effects of some overproduction and a strong U.S. dollar, high interest rates, and weaker grain prices which curtailed farmers' net income and ability to finance and buy the anticipated level of fertilizer product, created some excess inven­tory. Phosphate fertilizer prices have declined to generally unprofitable levels for most manufacturers.

Many of the chemical companies attributed their improved earnings to increased volume and better pricing in U.S. markets. For instance, indus­try leader Du Pont says that net in­come from U.S. operations in the second quarter was $220 million, a 121% increase over the second quarter last year. The improvement, the company says, was due primarily to

higher volume, moderation in the rate of increase in the price of raw mate­rials and energy, and increases in selling prices.

Although many companies were saying nice things about the U.S. chemical business, more found problems in foreign operations. It is as if companies are saying that al­though business was good, it should have been better. Chief among the overseas problems were soft econo­mies and the strengthening dollar against other currencies.

Again, Du Pont sounded the theme for many of the companies. Net in­come from foreign operations at Du Pont was down 44% to $42 million in the second quarter. The company says that international operations were affected by the recession in Eu­rope, economic weakness in Brazil

and Argentina, and strengthening of the dollar against world currencies.

Dow Chemical's financial vice president Robert M. Keil, however, says that he had observed an upturn during the spring in economic condi­tions in most of the countries in which Dow operates. But, he says, business in the Far East was slow in the countries that depend on exports to the U.S. Air Products also noted a continuing slowness in the European economies. But, in the foreign area, it seems to be the strengthening dollar that is giving chemical companies the most trouble. Hercules chairman Alexander F. Giacco says that "con­tinued strengthening of the dollar reduced the foreign earnings contri­bution by approximately 18 cents a share."

Non-U.S. chemical operations also

16 C&EN Auq. 17, 1981

FIRST-HALF 1981

Change from 1980 Earnings

7% 85

5 23

- 1 4

2 - 3 8

3 91

4

- 1 2 8

61 14 4

14 77

c

c

9

- 3 7 - 4 - 5

- 4 1 7

17 26 29

- 1 8 - 8

Profit margin8

1981

6.1% 6.1 4.2

11.3 8.6

3.8 7.0 3.2 6.8 4.6

7.9 6.3 2.6 8.7

15.0

5.5 10.4 2.4 2.6

14.0

1.3 9.3 6.7 2.4 3.1

7.3 9.8

13.1 2.6 2.1

1980

6.2% 3.8 4.4

10.1 10.8

4.3 11.3 3.0 4.6 4.6

8.5 7.7 1.9 8.5

15.9

5.0 7.5

c

c

14.1

2.3 11.0 6.9 4.0 2.0

6.9 8.2

13.3 3.5 2.5

Earnings per share

Recent July 31

$1.92 1.89 2.12 1.77 1.15

0.51 1.09 1.30 2.18 1.16

1.54 2.45 2.23 1.00 1.46

1.95 1.12 0.93 0.81 1.00

0.51 1.33 1.00 1.38 0.76

0.93 2.00 0.62 0.67 0.25

12 months

$6.87 8.06 7.22 7.78 5.38

2.29 4.78 4.99 6.88 4.03

5.16 7.84 4.91 3.66 5.68

6.25 3.36 3.08 0.37 4.72

1.61 5.55 3.90 3.85 na

3.35 6.72 2.33 3.49 0.44

July 31

61 31 y4

49% 743/4

541/4

24% 281/4

28% 47% 31

207e 59% 53 47 921/4

491/2

42% 26% 91/8

54%

22% 551/2

25% 32% 19

33% 47% 32% 28% 14%

STOCK MARKET DATA

Stock price

Recent 12 months High

69% 35% 52% 85% 65

32% 37% 30 54% 35%

30% 76% 55 54%

103

53% 42% 29% 10% 68%

35% 69 33% 37% 30%

36% 56 38 30% 16%

Low

51 y2

21 39% 591/4

50%

22% 26% 23% 29% 24

19% 51% 24 39% 73%

37% 24% 16% 4%

48%

20% 51% 24% 28 18%

25% 36% 25 20

9%

Price-earn­ings ratio July 31

9 4 7

10 10

11 6 6 7 8

4 8

11 13 16

8 13 9

25 12

14 10 6 8

na

10 7

14 8

32

Annual indicated dividend

3.20 2.00 3.40 3.00 3.00

1.20 1.80 2.05 2.68 1.60

1.40 2.88 1.84 1.60 2.60

2.48 0.80 1.50

0 2.30

1.40 2.00 2.20 2.40 0.56

0.92 2.20 0.60 1.20 0.80

Dividend yield, % of price

5.2 I 6.4 6.8 4.0 5.5

4.8 I 6.4 7.2 5.6 5.2

6.7 4.8 3.5 3.4 2.8

5.0 1.9 5.6

0 4.2

6.2 3.6 8.8 7.4 2.9

2.7 4.6 1.9 4.2 5.6

hurt profits at a number of the more diversified U.S. chemical producers. Among those noting chemical profits damage from abroad are GAF, Em-hart, National Distillers, and NL In­dustries. The chief causes are the same as for basic chemical companies' foreign troubles—poor European markets, especially in durables, and the stronger U.S. dollar.

Given these problems and the stagnant character of much of the U.S. economy, the wonder in the second quarter is that many diversi­fied chemical producers did fairly well. One of the main reasons is good performance in agricultural chemi­cals, in which nonbasic chemical producers have a big stake. Com­panies reporting better profits in agchems include Esmark, FMC, Northwest Industries (Velsicol), and

Uniroyal. Uniroyal, a considerably improved company after some blood-letting in the past two years, says that agricultural chemicals are its fastest-growing and most profit­able product line.

However, agricultural chemicals gave problems to a few producers. Kaiser Aluminum & Chemical says that its agricultural chemical results declined from 1980 because of poor weather conditions in several key market states. And Eli Lilly encoun­tered an interruption in growth of its highly successful Treflan herbicide. U.S. sales declined slightly in the first half from a year ago, but the main trouble was in Canada, where sales were crimped because of reduced acreage for rapeseed.

As usual, another product area, specialties, levered up profits for

many diversified chemical produc­ers—for example, General Electric's engineering plastics and Martin Marietta's specialty chemicals.

Problems remain for diversified companies making the bulkier basic chemicals. For example, at fast-ex­panding Georgia-Pacific, the chemi­cal business improved»overall in the second quarter from a year ago. However, chairman Robert E. Flow-erree notes that chemicals associated with the company's important poly­vinyl chloride and phenol products were weak because of their close tie to the troubled construction industry. And at U.S. Steel, chemical opera­tions, heavy in organic intermediates and commodity plastics, were hit by continuing depressed markets, which hurt volume and worsened a cost-price squeeze. D

Aug. 17, 1981 C&EN 17