Chemical Earnings, Profitability Dropped in 1989

Abstract

Rising feedstock costs and falling product prices spelled trouble for many chemical producers in last year's fourth quarter. Earnings for major chemical companies and oil firms producing chemicals dropped from the year-earlier period, but earnings for diversified companies that produce chemicals and for pharmaceutical firms continued to increase. For a group of 30 major chemical companies, combined earnings for the quarter fell 29% from fourth-quarter 1988 to $1.23 billion. Sales totaled $19.9 billion, about the same as in the year-earlier quarter. Profit margin (earnings as a percentage of sales) plummeted to a group average of 6.2%, down from 8.7% in fourth-quarter 1988 and down from 8.1% for the same companies in the third quarter. Thus, chemical company earnings fell from double-digit increases in the first quarter of 1989 to double-digit declines in the fourth quarter. Perhaps even more disturbing is that the fourth quarter, which is traditionally stronger than the third, when many companies shut ...