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The Revenue Impact of Eastman’s Chemical Intermediates Segment

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Chemical Intermediates segment

Since the beginning of 1Q16, Eastman Chemical (EMN) is reporting its revenue under the following four heads:

  • Additives & Functional Products
  • Advanced Materials
  • Chemical Intermediates
  • Fibers

Earlier, it reported under five different heads. The four heads are intended to provide better integration.

In 1Q16, the Chemical Intermediates segment accounted for ~28% of Eastman Chemical’s total revenue. This compares to 32% of its total revenue in 1Q15. Additives & Functional Products contributed 33%, Advanced Materials contributed 26%, and Fibers contributed 13%.

According to Eastman Chemical’s 1Q16 earnings report, revenue from its Chemical Intermediates segment declined by 20.7% on a year-over-year (or YOY) basis, from $782 million to $620 million.

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Outlook for Chemical Intermediates segment

The Chemical Intermediates segment has a wide range of end-use markets, including consumables, health and wellness, building and construction, transportation, electronics, and industrial chemicals and processing. Eastman believes that growth in Chemical Intermediates will be driven by a growing middle class, increased nutritional needs, and a shift in demand for non-phthalate plastics from phthalate plastics.

On the other hand, the segment continues to face challenges such as low crude oil prices, the dumping of plasticizers by Korea around the globe, the slowdown in China, and the strengthening of the US dollar, particularly against Asian currencies.

As of July 1, 2016, the Materials Select Sector SPDR ETF (XLB) held ~2.2% of its entire portfolio in Eastman Chemical. The fund’s other top holdings include Dow Chemical (DOW), Praxair (PX), and Ecolab (ECL) with weights of 11.2%, 6.4%, and 6.3%, respectively.

In the next part, we’ll look at Eastman Chemical’s best contributing segment.

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