The plastics and chemicals maker Eastman Chemical Co. (EMN) announced that it has completed the acquisition of petrochemical company Sterling Chemicals Inc. for $100 million in cash. The deal was originally announced in June 2011.
The deal is expected to be accretive to 2011 earnings per share. The transaction, which includes Sterling's plasticizer and acetic acid manufacturing assets in Texas City, Texas, is expected to be accretive to Eastman's full-year 2012 earnings per share in excess of its cost of capital.
Eastman plans to renovate and restart Sterling’s currently idled plasticizer manufacturing facility to produce non-phthalate plasticizers. This additional capacity will enable the company’s performance chemicals and intermediates (PCI) segment to serve the growing market demand for non-phthalate alternatives.
This acquisition supports Eastman’s growth strategy for its plasticizer product line, and will enable it to keep pace with the growing demand for non-phthalate alternatives. The Sterling merger will bring additional capacity online and continue to grow the business.
A few days back, Eastman declared a 2-for-1 stock split and increased the quarterly cash dividend by 11%.
Eastman announced that it will pay a dividend of 52 cents per share on a pre-split basis. The stock split will be in the form of a 100% stock dividend to be distributed on October 3, 2011 to stockholders of record as of September 15, 2011.
New shares issued following the stock split will be given to shareholders on October 3, 2011. Shareholders will be given one additional share for each share held.
Eastman’s common stock will begin trading on a split-adjusted basis on October 4, 2011.
Recently the company declared its results for the second quarter of 2011. The company reported second-quarter earnings of $2.76 per share, compared with $1.95 per share, a year earlier and beat the Zacks Consensus Estimate of $2.60 per share.
Sales improved across all product lines, revenues climbed 26% year over year to $1.9 billion, driven by higher sales volume and increased selling prices and outpaced the Zacks Consensus Estimate of $1.8 billion.
The higher sales volume was attributed primarily to growth in plasticizer product lines, increased demand for acetyl chemicals, the fourth quarter 2010 restart of a previously idled olefins cracking unit at the Texas facility, and stronger end-market demand especially in the packaging, transportation, and durable goods markets. The increase in selling prices resulted from higher raw material and energy costs.
Based on the strong first half 2011 results, the company expects to continue to deliver earnings growth in the second half of 2011.
The results for the second quarter were driven by strong sales volumes and higher prices and Eastman expects the trend to continue into the third quarter as well. It expects to incur costs related to planned and unplanned shutdowns that are expected to be approximately $25 million higher in the second half of 2011 compared with the first half.
Even with these higher costs, Eastman anticipates third-quarter 2011 earnings per share to be slightly higher than third-quarter 2010 earnings per share of $2.22 and expects full-year 2011 earnings per share to be slightly higher than $9.25.
Eastman Chemical’s diversified chemical portfolio, along with its integrated and diverse downstream businesses, is driving earnings. Eastman benefits from business restructuring and cost-cutting measures. The company has sold unprofitable units and closed down poorly performing ones.
The company however, faces volatility in raw material and energy costs, higher pension expenses and other growth-related costs.
Eastman competes with large multinational companies such as Celanese Corp. (CE) and The Dow Chemical Co. (DOW) and EI DuPont de Nemours & Co. (DD).
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
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment