Eastman(EMN) - 2024 Q1 - Quarterly Results

Corporate Overview Eastman reported strong Q1 2024 sequential earnings growth, driven by completed inventory destocking and Kingsport methanolysis facility revenue, despite a slight sales decline | (In millions, except per share amounts) | 1Q2024 | 1Q2023 | | :--- | :--- | :--- | | Sales revenue | $2,310 | $2,412 | | EBIT | $263 | $246 | | Adjusted EBIT* | $274 | $283 | | Earnings per diluted share | $1.39 | $1.12 | | Adjusted earnings per diluted share* | $1.61 | $1.63 | | Net cash used in operating activities | $(16) | $(2) | - CEO Mark Costa highlighted that inventory destocking is complete across most key end markets, including consumer durables, building and construction, and personal care[4] - The company achieved on-spec production and revenue generation at its Kingsport methanolysis facility, which is expected to contribute approximately $75 million of incremental EBITDA in 2024 compared to 2023[4][8] - The U.S. Department of Energy selected Eastman to receive up to $375 million for a second molecular recycling project in Longview, Texas[8] Segment Performance Q1 2024 segment performance was mixed, with Advanced Materials and Fibers growing, while Additives & Functional Products and Chemical Intermediates declined Advanced Materials Advanced Materials sales increased 1% to $748 million due to higher volume/mix, leading to increased EBIT from improved price-cost dynamics - Sales revenue increased 1% due to 4% higher sales volume/mix, partially offset by 3% lower selling prices[5] - Volume growth was driven by reduced customer inventory destocking in specialty plastics for consumer durables, though partially offset by destocking in the medical end market[6] - EBIT increased, primarily due to improved price-cost and higher sales volume/mix[7] Additives & Functional Products Additives & Functional Products sales decreased 9% to $704 million due to lower prices and volume, resulting in decreased EBIT from higher manufacturing costs - Sales revenue decreased 9%, resulting from 8% lower selling prices and 1% lower sales volume/mix[9] - Lower selling prices were mainly due to cost-pass-through contracts, with volume/mix down as growth in coatings and care additives was offset by declines in specialty fluids and agriculture[10] - EBIT decreased due to lower sales volume/mix and higher manufacturing costs from planned maintenance shutdowns[11] Fibers Fibers sales grew 9% to $331 million driven by higher volume/mix and prices, with EBIT increasing due to improved price-cost - Sales revenue increased 9%, comprised of 7% higher sales volume/mix and 2% higher selling prices[11] - Volume/mix growth was primarily driven by a double-digit percentage increase in textiles, thanks to strong adoption of Naia™ sustainable textile products[12] - EBIT increased as a result of higher sales volume/mix and improved price-cost[13] Chemical Intermediates Chemical Intermediates sales decreased 11% to $523 million due to lower prices, partially offset by volume, resulting in decreased EBIT from lower spreads - Sales revenue decreased 11%, driven by 13% lower selling prices, partially offset by 2% higher sales volume/mix[13] - Lower selling prices were a result of weak market conditions and lower variable costs, while sales volume/mix increased slightly due to growth in the plasticizers product line[14] - EBIT decreased due to lower spreads[15] Cash Flow and 2024 Outlook Eastman used $16 million in Q1 2024 operating cash and returned $95 million to shareholders, reaffirming 2024 adjusted EPS and cash from operations guidance Cash Flow In Q1 2024, $16 million cash was used in operating activities, and $95 million was returned to stockholders via dividends, prioritizing organic growth and shareholder returns | Cash Flow Item | Amount (in millions) | | :--- | :--- | | Cash used in operating activities | $(16) | | Dividends paid to stockholders | $95 | 2024 Outlook Eastman maintains its full-year 2024 adjusted EPS outlook of $7.25 to $8.00 and $1.4 billion cash from operations, anticipating benefits from innovation and Kingsport methanolysis | 2024 Full-Year Outlook | Value | | :--- | :--- | | Adjusted EPS | $7.25 - $8.00 | | Cash from Operations | Approx. $1.4 billion | - The company expects to benefit from its innovation-driven growth model and revenue from the Kingsport methanolysis facility, primarily in the second half of the year[17] Financial Tables This section presents detailed Q1 2024 financial statements, including Statements of Earnings, sales breakdowns, GAAP to non-GAAP reconciliations, Cash Flows, and net debt Table 1 – Statements of Earnings In Q1 2024, Eastman reported sales of $2,310 million, a decrease from Q1 2023, while net earnings increased to $165 million ($1.39 per diluted share) | (Dollars in millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Sales | $2,310 | $2,412 | | Gross profit | $532 | $529 | | Earnings before interest and taxes | $263 | $246 | | Net earnings attributable to Eastman | $165 | $134 | Table 2 – Segment and Geographic Sales Information This section details sales performance, showing 5% sequential growth, a 4% year-over-year decline, and varied geographic performance with Asia Pacific growing Table 2A – Segment Sales Information Q1 2024 total sales were $2,310 million, with Advanced Materials ($748 million) and Additives & Functional Products ($704 million) being the largest revenue segments | Sales by Segment (Dollars in millions) | Q1 2024 | Q1 2023 | Q4 2023 | | :--- | :--- | :--- | :--- | | Advanced Materials | $748 | $742 | $705 | | Additives & Functional Products | $704 | $777 | $640 | | Chemical Intermediates | $523 | $589 | $513 | | Fibers | $331 | $303 | $346 | | Total Eastman Chemical Company | $2,310 | $2,412 | $2,207 | Table 2B – Sales Revenue Change Total company revenue decreased 4% year-over-year due to price, while sequentially increasing 5% from Q4 2023 driven by volume/mix Sales Revenue Change: Q1 2024 vs. Q1 2023 | Segment | Revenue % Change | Volume / Mix Effect | Price Effect | | :--- | :--- | :--- | :--- | | Advanced Materials | 1% | 4% | (3)% | | Additives & Functional Products | (9)% | (1)% | (8)% | | Chemical Intermediates | (11)% | 2% | (13)% | | Fibers | 9% | 7% | 2% | | Total Company | (4)% | 3% | (7)% | Sales Revenue Change: Q1 2024 vs. Q4 2023 | Segment | Revenue % Change | Volume / Mix Effect | Price Effect | | :--- | :--- | :--- | :--- | | Advanced Materials | 6% | 6% | (1)% | | Additives & Functional Products | 10% | 8% | 1% | | Chemical Intermediates | 2% | 1% | 1% | | Fibers | (4)% | (7)% | 3% | | Total Company | 5% | 4% | 0% | Table 2C – Sales by Customer Location In Q1 2024, the United States and Canada were the largest market with $969 million in sales, while Asia Pacific sales grew year-over-year | Sales by Customer Location (Dollars in millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | United States and Canada | $969 | $1,065 | | Europe, Middle East, and Africa | $659 | $709 | | Asia Pacific | $564 | $521 | | Latin America | $118 | $117 | | Total Eastman Chemical Company | $2,310 | $2,412 | Table 3 – Non-GAAP EBIT Reconciliations and Margins This section reconciles GAAP to non-GAAP adjusted EBIT, showing Q1 2024 total company adjusted EBIT of $274 million with an 11.9% margin, and Fibers achieving 35.3% Table 3A - Segment, Other, and Company Non-GAAP EBIT Reconciliations Q1 2024 reported company EBIT of $263 million was adjusted by $11 million for impairments to reach a non-GAAP EBIT of $274 million | (Dollars in millions) | Q1 2024 GAAP EBIT | Adjustments | Q1 2024 Adjusted EBIT | | :--- | :--- | :--- | :--- | | Total Company | $263 | $11 | $274 | Table 3B - Segment Non-GAAP EBIT Margins In Q1 2024, the Fibers segment achieved the highest adjusted EBIT margin at 35.3%, a notable increase from Q1 2023, with total company margin at 11.9% | Adjusted EBIT Margin | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Advanced Materials | 13.9% | 11.6% | | Additives & Functional Products | 15.5% | 16.0% | | Chemical Intermediates | 3.1% | 7.1% | | Fibers | 35.3% | 31.0% | | Total Company | 11.9% | 11.7% | Table 4 – Non-GAAP Net Earnings and EPS Reconciliations This section reconciles GAAP to non-GAAP earnings, showing Q1 2024 adjusted EPS of $1.61 (down from Q1 2023), with a forecasted full-year adjusted effective tax rate of 16% Table 4A – Non-GAAP Earnings Reconciliations In Q1 2024, GAAP net earnings of $165 million ($1.39/share) were adjusted to non-GAAP net earnings of $190 million ($1.61/share) | (per diluted share) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | As reported (GAAP) | $1.39 | $1.12 | | Non-GAAP (Adjusted) | $1.61 | $1.63 | Table 4B - Adjusted Effective Tax Rate Calculation The Q1 2024 effective tax rate was 23%, with the forecasted full-year adjusted effective tax rate remaining consistent at 16% | Tax Rate | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Effective tax rate | 23% | 31% | | Forecasted full year adjusted effective tax rate | 16% | 16% | Table 5 – Statements of Cash Flows For Q1 2024, net cash used in operating activities was $16 million, with $179 million used in investing and $148 million provided by financing | (Dollars in millions) | First Three Months 2024 | First Three Months 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(16) | $(2) | | Net cash used in investing activities | $(179) | $(252) | | Net cash provided by financing activities | $148 | $357 | | Cash and cash equivalents at end of period | $499 | $599 | Table 6 – Total Borrowings to Net Debt Reconciliations As of March 31, 2024, Eastman's net debt increased to $4,581 million from year-end 2023, calculated from total borrowings of $5,080 million less $499 million in cash | (Dollars in millions) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total borrowings | $5,080 | $4,846 | | Less: Cash and cash equivalents | $499 | $548 | | Net debt | $4,581 | $4,298 |