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Costa: Eastman showed fourth quarter 'resilience'

Hank Hayes • Jan 30, 2020 at 7:30 PM

KINGSPORT — Eastman Board Chair and CEO Mark Costa was upbeat on Thursday about the company's 2019 performance despite earnings and revenues being slightly down from 2018.

“We demonstrated resilience in the fourth quarter despite continued difficult global economic conditions impacting consumer discretionary markets such as transportation,” Costa said in a release. “Notwithstanding the challenging conditions, for the year, we continued to make strong progress growing new business revenue from innovation and market development initiatives, particularly in the Advanced Materials segment. In addition, with full-year free cash flow approaching $1.1 billion, we once again showed our capability to generate strong cash flow. Although we don’t expect global economic conditions to improve in the coming year, we remain confident in our strategy and the strength of our cash flow going forward.”

Sales revenue for the year was $9.2 billion compared to $10.1 billion in 2018. Adjusted earnings per share was $7.13 for 2019 compared to $8.20 in 2018. Fourth quarter sales revenue was also down slightly from 2018's fourth quarter.

In the company segments for the year, sales were down in Additives & Functional Products, Advanced Materials, Chemical Intermediates and Fibers. Eastman is a global specialty products company based in Kingsport.

In 2019, cash from operating activities was $1.5 billion and free cash flow (cash from operating activities less net capital expenditures) was $1.1 billion. Priorities for uses of available cash include payment of the quarterly dividend, repayment of debt, funding targeted growth initiatives, and repurchasing shares. In 2019, the company returned $668 million to stockholders, with $343 million of dividends and $325 million of share repurchases. In addition, the company repaid $370 million of debt, with total borrowings reduced by $386 million, including the impact of currency translation on the carrying value of euro-denominated borrowings.

Commenting on the outlook for full-year 2020, Costa said: “We enter 2020 in a period of significant uncertainty related to macro factors that are out of our control. In this environment, we are focused on what we can control, including growing new business revenue by leveraging our innovation-driven growth model, aggressive cost management, and disciplined capital allocation. We are currently assuming that slow growth continues in 2020 at levels similar to 2019, although with less inventory destocking. Taking all of this together, we expect 2020 adjusted earnings per share to be between $7.20 and $7.60 and free cash flow to be between $1.0 billion and $1.1 billion.”

Eastman's stock closed Thursday at $77.725 per share, up $2.04.

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