FutureFuel To Get Listing on NYSE
Mar10

FutureFuel To Get Listing on NYSE

FutureFuel says it is going to start trading on the New York Stock Exchange on or about March 23 under the ticker symbol "FF". The company had been trading over the counter. Who is FutureFuel? Glad you asked. It is the former Batesville, Ark., complex of Eastman Chemical. Originally, it was a photographic chemical facility for Eastman Kodak. Then it evolved into a custom chemical and performance chemical plant. Its most notable contract was making the bleach activator nonanoyloxybenzenesulfonate (NOBS) for P&G. Eastman started to convert the facility into making biofuels such as biodiesel, ethanol, and solid lignin biomass. Private investors under the name Viceroy Acquisition bought the plant from Eastman for more than $75 million. Viceroy had raised about $160 million on the London Stock Exchange’s AIM market to break into the U.S. biofuels sector. (Back in those days, people would throw money at you at the mere mention of biofuels.) But FutureFuels, despite its name, is still very much a chemical company. During the first nine months of 2010 (Q4’s aren’t out yet) it generated $165.6 million in revenues. Some $131.1 million came from chemicals; $34.5 million were in biofuels. Its gross were $31.2 million from chemicals and a loss of $5.1 million in biofuels. (I’m guessing it will remain a chemical company.) By the way, that contract with P&G is alive and well. In fact, FutureFuel revenues from this contract alone in 2009 were $73.5 million. That represented about 37% of ALL of its revenues that year. Another $31.6 million in sales came from making a proprietary herbicide for Arysta...

Read More
When Shareholders Attack!!!
Oct20

When Shareholders Attack!!!

These are usually the kinds of stories I don’t pay much attention to. Last week, I received a press release from Eastman announcing a few changes to its board. CEO James P. Rogers is becoming chairman at the beginning of next year, replacing former CEO J. Brian Ferguson. No surprise there. Independent director Gary E. Anderson is coming lead director of the company. Who would be better in such a position than the former CEO of Dow Corning? And, Eastman plans to “declassify” its board. That doesn’t mean that some secret directors will now be known to the public. It means that Eastman’s eleven directors are divided into three classes. Each of the classes is elected to staggered, three-year terms. The class of three directors elected in 2010 is up for re-election in 2013; the class of four directors elected in 2011 will be up for re-election in 2014; and so on. At its 2011 annual meeting, Eastman shareholders will decide whether they want to elect all of the directors each year. The move would ostensibly make the board more accountable to shareholders. It is sort of like the difference between the U.S. Senate and the U.S. House of Representatives. “The board believes these latest actions are in the best interests of Eastman and its stockholders, and are further demonstration of the company’s ongoing commitment to strong corporate governance,” the company said in a statement. The board hasn’t always thought that. At the annual meeting back in May, Eastman was fighting a proposal to declassify its board. Gerald R. Armstrong submitted the proposal. He’s a Denver retiree who owns 98 Eastman shares. He has submitted shareholder rights proposals to a number of different companies in recent years. There are many people like him nowadays. I suppose you can call it a kind of hobby. Back then, Eastman said “a classified board structure remains in the best interests of Eastman and its shareholders.” To Eastman, a classified board meant stability and a greater ability to maintain a long-term strategy in a cyclical environment. Eastman also argued that the classified board is a defense against hostile takeovers. That isn’t a silly argument. The biggest obstacle to Air Products’ bid for Airgas is Airgas’ staggered board. But never underestimate a Denver retiree. Some 41,292,223 shares voted with Mr. Armstrong, 75.24% of Eastman’s total. He won big. The proposal was adopted. So, is Eastman just doing what it is being forced to do anyway? Not quite. As Eastman spokeswoman Tracy Broadwater pointed out to me, the adopted proposal was non-binding. I suppose Eastman was just nagged into doing it,...

Read More
Eastman Not Closing Ethylene After All
Jun22

Eastman Not Closing Ethylene After All

Here’s a sign that the U.S. petrochemical industry is becoming more competitive: Eastman Chemical has reversed a decision to close ethylene capacity at its Longview, Texas, complex. Eastman had been running four ethylene units at its Longview complex: one with about a billion lb of annual capacity of olefins; another two with a half million lb of capacity apiece; and another cracker, older and smaller than the others. In 2007, following the sale of its polyethylene business to Westlake Chemical, which remains a customer of Eastman’s Longview ethylene, Eastman decided to shut down the three smaller units at the site. It closed the smallest unit in 2007 and one of the half-million-lb units in 2008. However, it never closed the other half million lb unit and it now plans to bring the cracker that it closed in 2008 back in service by the first quarter of 2011. Earlier this month at the JP Morgan Diversified Industries Conference, CFO Curt Espeland said that fortunes have turned around for the Longview units. These plants use mostly propane as a feedstock and turn out a lot of coproduct propylene. The plants have benefitted from the abundance of shale gas in North America, which has kept prices for light, natural gas feedstocks low. “Propane in North America is expected to be pretty available and advantaged on a cost basis compared to the naphtha crackers,” he said. Also, Espeland expects the propylene market to remain tight. North American crackers are favoring lighter feedstocks, namely ethane, and are thus producing less propylene. Refineries, which have been running at low rates because of a cruddy gasoline market, have also been putting out less propylene. Now, I am not 100% certain about whether Espeland means that propane is available because of abundant supply as a natural gas liquid or because other ethylene crackers are opting to go as light as they can, using ethane instead of propane as a feedstock. In either case, other companies are going after propane/propylene arbitrage as well. For example, pipeline firm PetroLogistics is repurposing an ExxonMobil ethylene cracker it purchased a couple of years back into a propane dehydrogenation plant. It plans to start up this...

Read More
The Chemical Notebook Visits Eastman
May17

The Chemical Notebook Visits Eastman

From Pittsburgh Chemical Day, I headed down to visit Eastman Chemical in Kingsport, Tenn., last week. There the company has opened a 30,000 metric-ton-per-year Tritan polyester copolymer plant. The product is a bisphenol-A-free alternative to polycarbonate for house wares and baby bottles. I toured Eastman’s Kingsport chemical complex, which was founded in 1920 by George Eastman to make wood alcohol. I have seen many chemical plants, but I’m not so sure that I have witnessed something of such a scale that wasn’t attached to an oil refinery. Here are some facts I jotted down on my notebook while on a bus tour of the site: The site is situated on 858 acres. 7,000 people out of Eastman’s 10,000 worldwide workforce are employed in Kingsport. The site has 28 miles of paved roads and 37 miles of railroads. Some 500 rail switches are conducted at the site each week. The plant has 4 dedicated locomotives. The site generates 160 megawatts of power. The plant’s gasification unit, which makes acetyl products like cigarette filter tow, takes in 56 railcars of coal per day. 450 million gallons of water are drawn from the Holston River every day to cool the site’s reactors. The plant has two Subway restaurants, an Arby’s, a Honey Baked Ham, and other cafeterias. The site has a gymnasium that offers classes to workers such as aerobics and kickboxing. Eastman’s headquarters is just outside the fence line. The company also runs a 1,700-seat auditorium next door, which holds local Kingsport cultural events and first run movies. Now playing: The Spy Next Door. The only other chemical industry company town that I have seen that compares with Kingsport, is Midland, Michigan, where Dow is headquartered. Without Eastman, I’m not sure that Kingsport would have a nice hotel and regional airport. In fact, there probably wouldn’t be much of an economy there at...

Read More
Eastman Reviewing Strategic Options For PET
Apr26

Eastman Reviewing Strategic Options For PET

Eastman Chemical has put out a euphemistic “reviewing strategic options” press release regarding its polyethylene terephthalate resins business. “Strategic options” usually means divestiture, though companies normally insist that other means of disposal, such as a joint venture or initial public offering for the business, are possible. And the term is open ended enough that companies won’t lose face if they decide to hold off on plans to unload the business if it can’t be sold quickly. But given that “divestiture” is the only option Eastman mentioned and that it named Merrill Lynch as its financial advisor for the strategic review, what Eastman has in mind is almost certainly a sale. Eastman’s PET business makes up lion’s share of its performance polymers reporting segment, which has been struggling in recent years. In 2009, it generated an operating loss of $66 million on sales of $719 million. The year before, it lost $57 million on $1.1 billion in revenues. The company makes PET resins in Columbia, S.C., where it runs a 535,000-metric-ton-per-year plant that uses its IntegRex technology, a process that Eastman developed in the early 2000's to closely integrate purified terephthalic acid and PET production. The Eastman decision shouldn’t come as a surprise. In 2007 and 2008, the company exited its PET operations outside of the U.S. It sold a Spanish PET plant to La Seda de Barcelona. It also unloaded plants in Argentina and Mexico to Grupo ALFA, the Mexican conglomerate that owns U.S. PET resin maker DAK Americas. And, it disposed of a PET plant in the U.K. and PET and purified terephthalatic acid plants in the Netherlands to Indonesia’s Indorama for $354 million. Incidentally, Eastman is suing both DAK Americans and Indorama for infringing on its IntegRex patents. Those same years Eastman shut down some 400,000 metric tons of PET capacity, though it did convert some of the capacity to specialty polyester copolymer production. Eastman has been insinuating that it had put the PET business on notice. During the company’s fourth quarter conference call, CEO Jim Rogers said the company had overcome operational issues that had prevented the IntegRex plant from running at full operating rates. And he noted that he wanted the company to move into higher-profit, value added PET market segments. “The real test,” he said, “is going to come in the second quarter to see just how much our guys have been able to go about demonstrating to the markets that we got our act...

Read More