Eastman Chemical (EMN) has completed its earlier announced expansion of Eastman 168 non-phthalate plasticizer capacity at the Texas City manufacturing facility in Texas. The expansion boosted the overall capacity of Eastman 168 at the site by roughly 15%.
Eastman Chemical’s shares gained around 1.3% to close at $84.63 last Thursday. The stock is up roughly 1.5% since the announcement based on last Friday’s close.
Eastman Chemical bought the Texas City plant in 2011. The expansion required minimum capital investment as it was an extension of an already existing asset.
Products in which non-phthalate plasticizers are widely used include toys, childcare items, food contact materials and medical devices. It is also used for providing flexibility to polyvinyl chloride (PVC) in different applications. End markets for non-phthalate plasticizers range from building and construction, and health and wellness to a wide spectrum of consumer products.
Non-phthalate plasticizers demand remains strong across a variety of end-use markets. Eastman Chemical sees sustained demand and expects the market to require its next phase of capacity expansion by mid-2016.
The additional capacity expansion will leverage Eastman Chemical’s plants in Texas City and Kingsport. The expansion, which is expected to be a relatively low cost investment, will take the full capacity of Eastman 168 to more than 200,000 tons.
Kingsport and Texas City facilities together will help Eastman Chemical in sustaining its leadership position in North America and Europe by catering to the needs of current and new customers.
Eastman Chemical’s diversified chemical portfolio, along with its integrated and diverse downstream businesses remains its strength. It also benefits from business restructuring and cost-cutting measures. Eastman Chemical should also gain from increased capacity additions.
However, Eastman Chemical remains exposed to volatility in raw material costs and pricing pressure. Moreover, uncertainty regarding the timing of a recovery in Europe remains a concern.
Eastman Chemical is a Zacks Rank #3 (Hold).
Other companies in the chemicals space worth considering include LyondellBasell Industries N.V. (LYB), Celanese Corporation (CE) and PPG Industries Inc. (PPG). While LyondellBasell carries a Zacks Rank #1 (Strong Buy), both Celanese and PPG Industries hold a Zacks Rank #2 (Buy).
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