Highlights vs. 4Q 1997
- Net income of $0.95 per share, up 42%.
- Continued strong demand for core products.
- Lower raw material and plant turnaround costs.
- Excellent progress on cost reduction program.
NEWTOWN SQUARE, Pa., April 21 /PRNewswire/ -- ARCO Chemical Company
(NYSE: RCM) reported first quarter net income of $92 million, or $0.95 per
share, compared with $65 million, or $0.67 per share in the fourth quarter
1997 and $48 million, or $0.50 per share in the first quarter 1997. Revenue
for the first quarter was $934 million compared with $1,006 million in the
fourth quarter and $1,029 million a year ago. Lower revenue for the first
quarter 1998 primarily reflects lower selling prices, especially for MTBE.
Core products volume declined slightly relative to fourth quarter but was up
7% compared to first quarter a year ago.
Commenting on the results, Alan R. Hirsig, President and Chief Executive
Officer, said, "The strong first quarter results are encouraging. Compared to
last quarter, we benefited from lower raw material and plant turnaround costs
and excellent progress on our cost reduction program. In addition, despite
weakness in Asia, we saw a continuation of the healthy demand that was evident
in the fourth quarter for our propylene oxide (PO) and derivative products.
This was driven by strong economic conditions in the U.S. and Western Europe.
Over the course of the quarter, we saw a significant decline in the cost of
many of our key raw materials, including propylene, butane and methanol.
Finally, SG&A, R&D and other fixed costs were sharply lower, clear evidence of
our progress in reducing our overall cost structure."
Plant turnaround costs in the first quarter were $2 million compared to
$13 million in the fourth quarter. The Company anticipates turnaround costs
to be approximately $10-12 million in the second quarter and in the
$20-22 million range for the full year.
Comparing first quarter 1998 results with the same period last year, the
following factors contributed to higher earnings:
-- A 7% increase in core products sales volume;
-- Lower costs for key raw materials;
-- Lower SG&A, R&D and other fixed costs; and
-- Lower foreign exchange losses.
These factors were partially offset by generally lower sales prices,
weaker markets in Asia and lower demand for aircraft deicers due to the
unseasonably warm winter in North America and Europe.
Consistent with the Company's strategy to profitably grow its PO and
derivatives business, the Company's board of directors recently approved
moving forward with a new world-scale butanediol (BDO) plant in Rotterdam, the
Netherlands. The BDO plant will be adjacent to the new PO/styrene monomer
plant (PO-11) approved in 1997. The new plant, utilizing the Company's unique
PO-based technology will be the world's largest with a capacity of 250 million
pounds per year. Additionally, the Company is completing the debottleneck of
its BDO unit in Channelview, Texas, to 120 million pounds per year from
90 million pounds per year. The expansion will be completed by mid-year. BDO
and its derivatives are versatile chemicals used in the production of
engineering resins, elastomers, urethanes and solvents.
Commenting on the quarter, Marvin O. Schlanger, Executive Vice President
and Chief Operating Officer, said, "Although we are extremely pleased with our
strong financial results, we still have more to do to consistently deliver a
superior return to our shareholders. It is clear from this quarter's
performance that our Company has a number of fundamental strengths. These
include advantageous and differential technologies, market leadership
positions, a highly competitive cost structure, and dedicated employees.
Leveraging these strengths to build shareholder value is our top priority."
As was previously announced, the Board named Mr. Schlanger as the
Company's new President and CEO, effective May 14, 1998.
ARCO Chemical Company is a leading worldwide manufacturer and marketer
of propylene oxide and derivatives and other intermediate chemicals. Its
products are used in a wide range of consumer and industrial goods, including
automotive components, cushioning, paints and coatings, plastics, home
furnishings, engine coolants and reformulated gasoline.
Except for historical facts, the matters discussed in this press release
concerning the company's outlook and business plans are forward-looking
statements. Since these statements are based on certain assumptions and
involve risks and uncertainties, they are subject to change at any time.
Actual results could differ materially from expected results based on numerous
factors, including the level of product demand, the cost and availability of
raw materials, changes in the competitive environment, the achievement of cost
reductions and efficiencies, the timing and scope of technological advances,
the company's ability to complete construction projects on schedule, the
overall condition of the chemical industry and other risks detailed from time
to time in the company's filings with the Securities and Exchange Commission,
including the company's Report on Form 10-Q for the quarterly period ended
June 30, 1997.
Visit the new Press Room on ARCO Chemical's website at
http://www.arcochem-news.com where you'll find their press releases, company
facts and figures, photo images, and more. To receive a press release by fax,
call 800-758-5804; use code No. 062063 (U.S. only).
ARCO CHEMICAL COMPANY
Selected Financial Data
(Millions of dollars, except per share data)
Three Months Ended
March 31
(Unaudited)
1998 1997
Sales and other operating revenues $934 $1,029
Costs and other operating expenses 720 844
Gross profit 214 185
Selling, general and administrative expense 52 68
Research and development 17 21
Operating income 145 96
Interest expense 18 22
Other (income) expense, net (a) (8) 1
Income before income taxes 135 73
Provision for income taxes 43 25
NET INCOME $92 $48
Earnings per share
Basic $.95 $.50
Diluted $.95 $.50
(a) Primarily interest income, results from equity investments, foreign
exchange gains and losses.
The effective full year tax rate for 1998 is expected to be 32.0%.
Depreciation/amortization expense for the quarters ended 3/31/98 and
3/31/97 was $52 million and $57 million, respectively.
ARCO CHEMICAL COMPANY
SALES VOLUME STATISTICS
Three Months Ended
March 31
(Unaudited)
1998 1997
Core Products (mm lbs.) (b) 1,071 1,002
Co-products:
TBA and Derivatives (mm gals.) 250 260
SM (mm lbs.) 699 708
(b) Includes PO, PO derivatives, TDI and ADI.
SOURCE ARCO Chemical Company
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Related links:
http://www.arcochem-news.com
Company News On-Call: http://www.prnewswire.com or
fax, 800-758-5804, ext. 062063
CONTACT:
Sallie D. Anderson, Media Relations,
610-359-5773, or Sami Ahmad, Investor Relations, 610-359-3171,
both of ARCO Chemical
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