For Immediate Release
Chicago, IL - May 11, 2012 - Today, Zacks Equity Research
discusses the U.S. Chemical Companies, including
EI DuPont de Nemours & Co
(
DD
),
The Dow Chemical Company
(
DOW
),
Eastman Chemical Company
(
EMN
) and
Celanese Corp.
(
CE
).
A synopsis of today's Industry Outlook is presented below. The
full article can be read at
http://www.zacks.com/stock/news/74899/chemical-industry-stock-outlook-may-2012
The American Chemistry Council notes that emerging market
growth, abundant shale gas and a still supportive dollar exchange
rate should help drive U.S. chemical exports.
A string of factors are driving growth in the export markets
including favorable energy costs stemming from the abundance of
shale gas and strong demand from the emerging markets. Affordable
natural gas and ethane (derived from shale gas) offer U.S.
producers a compelling cost advantage over their global
counterparts who use a more expensive, oil-based feedstock.
Further, cost-cutting measures implemented by chemical companies,
such as plant closures, aggressive cost containment and production
improvement initiatives, should yield industry-wide margin
improvements. Cash flows derived through these actions can be used
for growth.
Mergers and acquisitions offer chemical companies another means to
shore up growth in this difficult scenario. These companies remain
focused on exploring growth opportunities in the fast-growing
emerging markets, particularly the lucrative regions of
Asia-Pacific and Latin America such as China and Brazil.
A major deal in this space was last year's acquisition of Danisco
by
EI DuPont de Nemours & Co
(
DD
) for $6.3 billion. The acquisition strengthened the company's
presence in the food ingredient and enzyme markets, and expanded
its presence in industrial biotechnology and biofuels.
The deal synced well with DuPont's strategy to expand beyond its
chemical and manufacturing focus into the "megatrend" sectors of
agribusiness and alternative energy. Both industries are expected
to grow rapidly in the coming years as food demand and prices
increase and clean energy policies gain more ground.
Some of the key end-markets for chemical products are on an
uptrend. This has been manifested by the recent earnings reports of
leading chemical players. DuPont, for example, logged a
double-digit surge in sales riding on higher sales volume in the
Agriculture segment. Danisco contributed to higher profit in the
quarter.
Despite softness in the consumer electronics segment, the company
is poised for growth on the heels of strong momentum in agriculture
and food businesses. On the cost-saving front, DuPont remains on
track to achieve its fixed cost productivity targets of $1 billion
by 2012.
The other chemical titan,
The Dow Chemical Company
(
DOW
), is delivering cost synergies from the Rohm & Haas
acquisition and is targeting synergy capture of $2 billion by the
end of 2012. Dow is also benefiting from strong fundamentals in
agriculture and food markets. It believes economic recovery will
gain momentum in the second quarter and through the remainder of
2012.
Moreover, Dow sees an improving U.S. economy citing tailwind from
the nation's rich access to low-cost natural gas. Despite
challenges in Europe faced by both DuPont and Dow, we are
optimistic about the long-term prospects of these two industry
behemoths.
Eastman Chemical Company
(
EMN
) is expected to benefit from the acquisition of Solutia (expected
to close in mid-2012). Higher selling prices contributed to revenue
growth in the March quarter. The company's diversified chemical
portfolio, along with its integrated and diverse downstream
businesses, is driving earnings. The company benefits from business
restructuring and cost-cutting measures as well as increased
capacity additions.
We also hold a favorable view on
Celanese Corp.
(
CE
) despite the challenges it faces in Europe. The company's profit
shot up 29% in the March quarter on higher volumes and pricing in
its acetyl intermediates and industrial specialties businesses. We
like the company's initiatives to improve margins and profits by
running its plants better and controlling expenses, which should
yield results through the rest of
2012.
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CELANESE CP-A (CE): Free Stock Analysis Report
DU PONT (EI) DE (DD): Free Stock Analysis
Report
DOW CHEMICAL (DOW): Free Stock Analysis Report
EASTMAN CHEM CO (EMN): Free Stock Analysis
Report
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