Eastman Chemical Company (NYSE:EMN) announced its fourth-quarter and full-year 2021 financial results.
The company confirms expected 8-12 percent adjusted EPS growth for 2022, building on strong growth in 2021:
- Strong specialty growth enabled by innovation-driven growth model
- Accelerating leadership in circular economy, including recently announced world's largest molecular recycling facility in France
- Strong cash generation resulting in increased organic growth investments and higher return of cash to stockholders
|(In millions, except per share amounts)||4Q21||4Q20||FY21||FY20|
|Earnings before interest and taxes ("EBIT")||578||76||1,281||741|
|Earnings per diluted share||2.81||0.23||6.25||3.50|
Adjusted earnings per diluted share*
|Net cash provided by operating activities||430||406||1,619||1,455|
|Free cash flow||190||301||1,064||1,072|
*For non-core and unusual items excluded from adjusted earnings and for adjusted provision for income taxes, calculation of free cash flow, segment adjusted EBIT margins, and net debt, and reconciliations to reported company and segment earnings and to cash provided by operating activities and total borrowings for all periods presented in this release, see Tables 3A, 3B, 4, 5A, 5B, and 6.
"Eastman made tremendous progress in 2021, delivering record sales revenue and adjusted EPS for the year. We are continuing to leverage our innovation-driven growth model to grow faster than our end markets. We also made outstanding progress advancing our leadership in the circular economy, including plans to build multiple world-scale material-to-material molecular recycling facilities," said Mark Costa, Board Chair and CEO. "I'm incredibly proud and appreciative of all that our employees did to work through very challenging conditions, stay focused on delivering record results, and advance our growth programs. We also remain focused on driving strong cash flow going forward and on continued disciplined allocation of cash. We are very excited about delivering continued success in 2022 and in the coming years."
Segment Results 4Q 2021 versus 4Q 2020
Advanced Materials – Sales revenue increased 15 percent due to 8 percent higher sales volume/mix and 7 percent higher selling prices. Higher sales volume/mix was due to continued momentum with innovation and market development as well as strong end-market demand for specialty plastics. Higher selling prices were primarily due to double-digit price increases in specialty plastics resulting from higher raw material, energy, and distribution prices.
EBIT declined due to lower spreads as higher selling prices were catching up to higher raw material, energy, and distribution costs as well as higher manufacturing maintenance costs and continued investments in growth. This was partially offset by a significant improvement in product mix.
Additives & Functional Products – Sales revenue increased 17 percent due to 18 percent higher selling prices. Prices were up double digits across all product lines, led by coatings additives, due to higher raw material, energy, and distribution prices, and strong end-market demand. Sales volume/mix was flat as gains in key end markets, including building and construction, feed additives, and aviation fluids, were offset by the impact of the divested tire additives product lines.
EBIT declined due to lower spreads as higher selling prices were catching up to higher raw material, energy, and distribution costs, and the impact of divested tire additives product lines.
Fibers – Sales revenue increased 14 percent due to 13 percent higher sales volume/mix. The higher sales volume/mix was due to strong growth in textiles products resulting from innovation and market development and the recovery of textiles end markets due to the COVID-19 pandemic.
EBIT decreased due to higher sales volume being more than offset by higher raw material, energy, and distribution costs combined with limited near-term pricing flexibility in acetate tow agreements and continued investment in growth.
Chemical Intermediates – Sales revenue increased 46 percent due to 47 percent higher selling prices as raw material, energy, and distribution prices remained elevated. Improved product mix, due to increased sales of functional amines in the agricultural end market and specialty plasticizers, was offset by lower sales volume due to the closure of our Singapore manufacturing facility.
EBIT increased due to higher spreads as selling prices more than offset higher raw material, energy, and distribution costs. Higher manufacturing maintenance costs negatively impacted EBIT.
Corporate Results 2021 versus 2020
Sales revenue increased 24 percent with increases across all operating segments. The strong topline growth was due to 15 percent higher selling prices and 8 percent higher sales volume/mix. Higher selling prices were due to significantly higher raw material, energy, and distribution prices, and strong end-market demand as the global economy recovered from the COVID-19 pandemic. Higher sales volume/mix was due to innovation and market development and strong end-market demand.
EBIT increased due to more favorable product mix resulting from increased sales of specialty products and higher sales volume, partially offset by higher manufacturing maintenance costs and continued investment in growth.
Segment Results 2021 versus 2020
Advanced Materials – Sales revenue increased 20 percent primarily due to 16 percent higher sales volume/mix. Strong volume growth and more favorable product mix were due to continued momentum with innovation and market development as well as strengthened demand for specialty plastics products sold into durable goods, medical, and electronics end markets, and for advanced interlayers and performance films products sold into transportation end markets.
EBIT increased due to more favorable product mix and higher sales volume, partially offset by lower spreads as higher selling prices were catching up to higher raw material, energy, and distribution costs. Higher manufacturing maintenance costs and continued investment in growth unfavorably impacted EBIT.
Additives & Functional Products – Sales revenue increased 22 percent due to 12 percent higher selling prices and 9 percent higher sales volume/mix. Higher selling prices across the segment were primarily due to higher raw material, energy, and distribution prices. Higher sales volume/mix was led by double-digit gains in coatings additives and specialty fluids due to strengthened demand and improved market conditions for products sold in transportation, building & construction, and durable goods end markets.
Adjusted EBIT increased due to more favorable product mix and higher sales volume, partially offset by lower spreads as higher selling prices were catching up to higher raw material, energy, and distribution costs. Higher manufacturing maintenance costs and continued investment in growth unfavorably impacted EBIT.
Fibers – Sales revenue increased 8 percent due to 7 percent higher sales volume/mix led by strong growth for textiles products due to innovation and market development and continued recovery of the textiles end market.
EBIT decreased due to higher sales volume being more than offset by higher raw material, energy, and distribution costs combined with limited near-term pricing flexibility in acetate tow agreements. Higher manufacturing maintenance costs and continued investment in growth unfavorably impacted EBIT.
Chemical Intermediates – Sales revenue increased 36 percent due to 38 percent higher selling prices as raw material, energy, and distribution prices were significantly higher and commodity markets remained tight. Improved product mix, due to increased sales of functional amines in the agricultural end market and specialty plasticizers, was offset by lower sales volume due to the closure of our Singapore manufacturing facility.
EBIT increased significantly due to higher spreads and more favorable product mix partially offset by higher operating costs.
In 2021, cash from operating activities was $1.6 billion. Proceeds from the sale of certain tire additives product lines were $667 million. Capital expenditures were $555 million. The company returned $1.4 billion to stockholders in 2021 through dividends and share repurchases using cash sourced from operating cash flow and proceeds from divested businesses. In 2021, the company repaid $350 million of debt.
Priorities for uses of available cash for 2022 include organic growth investments, payment of the quarterly dividend, bolt-on acquisitions, and share repurchases.
Commenting on the outlook for full-year 2022, Costa said: "We enter 2022 having delivered record full-year 2021 sales revenue and adjusted EPS reflecting the strength of our innovation-driven growth model. Our specialty product lines are growing faster than our end markets, as we generated approximately $600 million of new business revenue last year, which will drive significant growth in 2022. In addition, we continued to make progress improving our portfolio. We achieved these results despite a number of headwinds, including the continued impact of COVID-19, unprecedented logistics and supply chain challenges, and inflation, including higher raw material and energy costs.
"As we look forward, we expect market demand to remain strong and continue growing faster than our end markets due to our innovation and market development initiatives. The pricing actions that we took in the second half of last year are expected to deliver a strong spread tailwind in the specialty businesses. We also expect to benefit from a substantially lower cost structure as we continue to implement our operations transformation program and have substantially lower manufacturing maintenance costs. Our strong cash generation and the proceeds from the divestitures are expected to enable increased organic growth investment and higher share repurchases. These strong tailwinds are expected to more than offset the approximately $100 million EBIT impact from the divested businesses and normalization of margins in Chemical Intermediates. Building on our strong results in 2021, we expect 2022 revenue to be higher than 2021 and for adjusted EPS to be between $9.50 and $10. We also expect operating cash flow to be greater than $1.6 billion."
The full-year 2022 projected earnings exclude any non-core, unusual, or nonrecurring items. Our financial results forecasts do not include non-core items (such as mark-to-market pension and other postretirement benefit gain or loss and asset impairments and restructuring charges) or any unusual or non-recurring items, and we accordingly are unable to reconcile projected earnings excluding non-core and any unusual or non-recurring items to reported GAAP earnings without unreasonable efforts.
This news release includes forward-looking statements concerning current expectations and assumptions for future global economic conditions; logistics challenges, supply chain issues for customers, and raw material and energy costs; competitive position and acceptance of specialty products in key markets; mix of products sold; cost reductions; the completion and the total purchase price for the agreed sale of the adhesives resins business; and revenue, earnings, cash flow, and cash and cash equivalents for full-year 2022. Such expectations and assumptions 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 and assumptions 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 quarterly report on Form 10-Q filed for third quarter 2021 available, and the annual report on Form 10-K to be filed for full year 2021 and to be available, on the Eastman web site at www.eastman.com in the Investors, SEC Filings section.
Conference Call and Webcast Information
Eastman will host a conference call with industry analysts on January 28, 2022 at 8:00 a.m. ET. To listen to the live webcast of the conference call and view the accompanying slides and prepared remarks, go to investors.eastman.com, Events & Presentations. The slides and prepared remarks to be discussed during the call and webcast will be available at investors.eastman.com at approximately 5:00 p.m. ET on January 27, 2022. To listen via telephone, the dial-in number is 323-794-2093, passcode number 2580007. A web replay, a replay in downloadable MP3 format, and the accompanying slides and prepared remarks will be available at investors.eastman.com, Events & Presentations. A telephone replay will be available continuously from 11:00 a.m. ET, January 28, 2022 to 11:00 a.m. ET, February 7, 2022 at 888-203-1112 or 719-457-0820, passcode 2580007.
Founded in 1920, Eastman is a global specialty materials company that produces a broad range of products found in items people use every day. With the purpose of enhancing the quality of life in a material way, Eastman works with customers to deliver innovative products and solutions while maintaining a commitment to safety and sustainability. The company's innovation-driven growth model takes advantage of world-class technology platforms, deep customer engagement, and differentiated application development to grow its leading positions in attractive end markets such as transportation, building and construction, and consumables. As a globally inclusive and diverse company, Eastman employs approximately 14,000 people around the world and serves customers in more than 100 countries. The company had 2021 revenues of approximately $10.5 billion and is headquartered in Kingsport, Tennessee, USA.