Chemicals expected to post 'disastrous' 4Q results

Leading chemical companies are expected to report the recession sharply cut into fourth-quarter earnings when final results are released over the next few weeks.

"The fourth quarter is likely to be a disastrous quarter from an earnings perspective, as companies spin woeful yarns of weak global demand" and "inventory destocking across supply chains," BB&T Capital Markets analyst Frank Mitsch said in a note to clients.

The S&P Chemicals Index, a basket of industry stocks, fell 40.7 percent during the fourth quarter.

The industry makes the building blocks for thousands of items ranging from automobile paint to food dyes to polyester.

During the September-to-December period consumers spent less money than a year earlier, causing a drop in demand for chemical products. That severally cut into profit margins, and counteracted the positive effect falling energy prices had on the industry.

In addition, several joint ventures and acquisitions fizzled.

The Kuwaiti government pulled out of a joint venture with Dow Chemical late in December. Dow had expected more than $7 billion in cash from that deal.

That threw into question whether Dow's $15.3 billion buyout of Rohm & Haas Co., originally scheduled to close early in 2009, would take place.

The Federal Trade Commission approved the deal Friday, creating a Tuesday deadline for the closing. But Dow said Monday it would not close by that date, news that led Rohm & Haas to file a lawsuit.

Dow is incurring a penalty fee of about $3 million per day since the Rohm & Haas deal did not close by Jan. 10.

In December Dow laid off 11 percent of its work force, closed 20 plants, and idled 180 more.

Analysts polled by Thomson Reuters expect Midland, Mich.-based Dow to earn 13 cents per share on revenue of $13.4 billion for the fourth quarter. Analysts typically exclude one-time charges. Results are due before the opening bell on Feb. 3.

Meanwhile Rohm & Haas said earlier this week it will cut about 900 jobs, idle or close some plants and record $90 million in fourth-quarter pretax charges.

Analysts expect the Philadelphia-based company to earn 63 cents per share on revenue of $2.3 billion. Rohm & Haas has yet to announce when it will release its results.

DuPont becomes the first major chemical company to report earnings when it releases results on Jan. 27. The Wilmington, Del., company has guided for a fourth-quarter loss of 20 cents to 30 cents per share, excluding a restructuring charge of 40 cents per share.

In early December, DuPont said it would cut 2,500 jobs, release 4,000 contractors and implement work schedule reductions and redeploy more than 400 employees on projects to reduce working capital and operating costs.

Analysts expect DuPont to post a loss of 24 cents per share on revenue of $6.17 billion.

During the fourth quarter Huntsman Corp. let Hexion Specialty Chemicals walk away from a $6.51 billion buyout in late 2008 for $1 billion. Hexion had been trying to scuttle the deal for months, and several court rulings had favored Huntsman.

Many on Wall Street wondered why Huntsman walked away so easily. Its stock has traded between $25.01 and $2.82 in the past 52 weeks.

"Huntsman's decline ... appears somewhat self-inflicted as it decided to settle a legal battle when from all outward appearances it was winning," BB&T's Mitsch said.

Last week the company said it would prune 1,175 jobs and close a plant in the United Kingdom.

Analysts expect the company to lose 5 cents per share on revenue of $2.44 billion. The company says it expects to post results during the week of Feb. 16 or 23.