Shares of Eastman Chemical Company
(EMN - Analyst Report
) gained as much as 1.6% during the trading session following the news of the expansion of Eastman 168 non-phthalate plasticizers’ capacity at the Texas City manufacturing facility.
The expansion at the facility will increase the overall capacity of Eastman 168 by roughly 15% and operations are expected to begin by mid-2014. The company’s shares eventually closed at $81.46 on the day following the news release, gaining around 1.5%.
The expansion will require minimum capital investment as it is an extension of an already existing asset. The capacity expansion at the Texas City facility also creates a chance for another expansion of similar kind in the near term. The capacity addition to the Texas City facility, which was acquired in 2011, was consistent with the market growth expectations.
Non-phthalate plasticizers demand remained strong across a variety of end-markets and end-uses. As per Eastman Chemical, the capital invested for the expansion will help it in sustaining its leadership position in North America and Europe by catering to the needs of current and new customers.
Products in which non-phthalate plasticizers are widely used include toys, childcare items, food contact materials and medical devices. It is also used for providing flexibility to PVC in different applications. End markets for non-phthalate plasticizers range from building and construction, and health and wellness to a wide spectrum of consumer products.
Eastman Chemical reported impressive second-quarter 2013 results in Jul 2013. Both revenues and adjusted earnings for the quarter topped Zacks Consensus Estimates. Revenues soared year over year on contributions from the Solutia acquisition.
Eastman Chemical’s diversified chemical portfolio, along with its integrated and diverse downstream businesses, remain its strength. It also benefits from business restructuring, cost-cutting measures and increased capacity additions.
However, the company remains exposed to volatility in raw material costs and lower pricing. The uncertain economic recovery in Europe is also an overhang. The company sees earnings in the second half to be modestly lower than the first due to seasonality.
Eastman Chemical currently carries a Zacks Rank #3 (Hold) and will release its third quarter 2013 results on Oct 24.
Other companies in the chemical industry worth considering are Akzo Nobel NV
), Air Products & Chemicals Inc.
(APD - Analyst Report
) and BASF SE
). All of them hold a Zacks Rank #2 (Buy).