Eastman Chemical Company Chairman & CEO Brian Ferguson and senior executives said the company has made significant progress toward improving profitability and is focusing on a growth strategy that builds on Eastman’s strengths in polyester, acetyl and organic chemistry technologies. Ferguson’s comments came today during an Investor Day event in New York, where the company also announced the development of a breakthrough polyester innovation, called IntegRex technology.
“We continue to see positive results from decisive actions we’re taking to improve profitability and earn the right to grow,” Ferguson said. “Over the past year, we’ve divested businesses and product lines that are no longer a strategic fit for Eastman, consolidated manufacturing operations in key areas to strengthen our competitive position and reduced our employee base by about 20 percent.”
As a result of these actions, Ferguson said Eastman has seen a measurable improvement in its operating earnings for almost all business segments. The company has achieved this performance while maintaining financial discipline.
“Our operating foundation is stronger as a result of our restructuring actions and financial discipline,” Ferguson said. “Our focus now will be building on this foundation and extending Eastman’s expertise and know-how to market segments that offer the greatest growth potential and where we can differentiate ourselves from competitors.”
Ferguson said that Eastman’s market analysis over the past year has reinforced the belief that the company is well-positioned to succeed in targeted opportunities in high growth markets, including building and construction, packaging, healthcare and electronics.
IntegRex Technology– Eastman’s New PET Manufacturing Process
“A great example of our ability to grow from our strengths is our integrated polyester strategy,” Ferguson said. “We can meet commodity PET (polyethylene terephthalate) needs with the lowest-cost production technology. At the same time, we can make better use of intermediates capacity and have the potential to redeploy PET assets to make unique copolyester products to serve new markets.
“A key element of that integrated strategy is our proprietary IntegRex technology we’re announcing today,” Ferguson said. A breakthrough innovation in the manufacturing of PET resin, IntegRex technology is based on the integration from paraxylene to PET resin and features multiple process innovations.
Allan Rothwell, Eastman Chemical Company executive vice president and president of the company’s Voridian Division, said, “We believe this technology gives Eastman a competitive advantage in a growing global market with sustainable returns above the cost of capital.
“Our goal is to help our customers grow by providing them with a reliable supply of competitively priced PET with consistent quality and delivery,” Rothwell said. “With our long history in the PET business and heritage process innovation, it’s only fitting that it is Eastman who is introducing what is truly a step-change technology.”
Rothwell said that in North America, where Eastman is the largest PET producer, demand for PET is expected to outpace supply by 2006. To meet the anticipated additional market demands in North America, the company plans to build a 350,000 metric ton PET manufacturing facility in Columbia, S.C., using IntegRex technology. Construction is expected to begin January 2005, with full capacity expected to be on-line by fourth quarter 2006.
Plans for the new facility and supporting infrastructure represent an investment of more than $100 million. “IntegRex technology helps position Eastman with the lowest conversion cost and lowest capital cost per pound of product in North America,” Rothwell said.
Growth with Discipline
“While we are positioning ourselves for the future, we are not departing from the things that have historically made us strong,” Ferguson said. “What is changing is how and where we leverage those strengths. We will meet our customers’ needs by delivering greener, smarter and lower-cost solutions. And we will focus our resources on markets and technologies where there is growth and where we can apply our unique strengths and products.”
Ferguson said Eastman will continue to achieve growth by offering key differentiated coatings, adhesives and specialty plastics products. The company will also pursue new opportunities, such as extending its product capabilities from industrial applications to consumer electronics and durable goods. In addition to expanding its product reach, Eastman said it intends to achieve incremental profitability by enhancing its presence in the growing Asian marketplace.
Eastman will continue its financial discipline going forward by holding capital expenditures, including those for the planned IntegRex facility, to slightly above depreciation and amortization in 2005. Eastman plans to achieve a financial profile in line with a solid ‘BBB’ credit rating, while continuing to maintain a strong dividend.
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