NEWTOWN SQUARE, Pa., July 21 /PRNewswire/ -- ARCO Chemical Company
(NYSE: RCM) today reported second quarter net income of $35 million, or $0.36
per share, compared with $48 million, or $0.50 per share in the first quarter
1997 and $81 million, or $0.84 per share, in the second quarter 1996.  Revenue
for the second quarter 1997 was $956 million compared with $1,029 million in
the first quarter and $959 million a year ago.
    Net income for the first six months of 1997 was $83 million, or $0.86 per
share, compared with $187 million, or $1.94 per share, for the first six
months of 1996.  Revenue for the first six months of 1997 was $1,985 million
compared with $1,941 million a year ago.
    Commenting on the quarter, Alan R. Hirsig, President and Chief Executive
Officer, said, "These results were disappointing and clearly unacceptable.
Compared to first quarter 1997, the second quarter reflects higher costs
associated with three scheduled plant turnarounds.  Higher sales volumes for
propylene oxide and butanediol contributed positively to earnings.  As the
second quarter progressed, we also saw margins for MTBE and styrene monomer
improve, due to tighter supply and demand balance in these markets and lower
raw material costs.  However, these factors were more than offset by the
turnaround expenses and weak TDI and polyol markets."
    Turnaround costs in the second quarter were $23 million compared to
$2 million in the first quarter of 1997.  The company anticipates turnaround
costs will be $10 million in the third quarter of 1997 and $13 million in the
fourth quarter of 1997.
    Comparing second quarter 1997 results with the same period last year, the
following factors contributed to lower earnings:
    -- Turnaround costs were $16 million higher than a year ago;
    -- Compressed product margins, resulting from higher costs for most raw
materials and weaker product prices; and
    -- Expiration of a number of fixed fee MTBE contracts.
    These factors were partially offset by higher propylene oxide and
derivatives volume and increased propylene oxide margins.
    During the second quarter, ARCO Chemical announced that it is implementing
a major cost-reduction program as part of a broader strategy to achieve
greater operational efficiencies and increase shareholder value.  The program
will result in an estimated $150 million in annual cost savings in the
company's structural costs, which are about $750 million a year.  Between 800
and 1,100 employee and contractor positions will be eliminated as part of the
cost-reduction program, which is expected to be substantially in place by
1999.
    The company anticipates that a special charge to earnings will be taken
later in 1997 to account for the costs of the program.  The amount of the
charge has not been determined.
    Mr. Hirsig further commented, "Achieving profitable growth in our PO and
related businesses has been and will continue to be our primary focus.  We are
investing to commercialize new polyol and ADI technologies and to improve the
performance of our recently acquired TDI plant.  Furthermore, the bold steps
we are taking to significantly reduce our cost structure are also designed to
give us a strong platform from which to achieve our ambitious growth
objectives, outperform our competitors, and deliver greater shareholder
value."
    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.

                         ARCO CHEMICAL COMPANY
                        Selected Financial Data
              (Millions of Dollars, except per share data)

                                          Three Months         Six Months
                                         Ended June 30        Ended June 30

                                                     (Unaudited)

                                         1997      1996     1997       1996

    Sales and other operating revenues  $ 956     $ 959    $1,985    $1,941
    Costs and other operating expenses    795       743     1,639     1,473

    Gross profit                          161       216       346       468

    Selling, general and administrative
    expenses                               67        70       135       133
    Research and development               20        21        41        39

    Operating income                       74       125       170       296

    Interest expense                     ( 20)     ( 21)     ( 42)     ( 43)
    Other (expense)income, net(A)          (1)        9        (2)       18

    Income before income taxes             53       113       126       271
    Provision for income taxes             18        32        43        84

    NET INCOME                            $35       $81       $83      $187

    Net income per common share          $.36      $.84      $.86     $1.94

    (A) Primarily interest income, results from equity investments, and
foreign exchange gains and losses.

    The effective full year tax rate for 1997 is expected to be 34%.

    Depreciation/amortization expense for the six months ended 6/30/97 and
6/30/96 was $116 million and $109 million, respectively.

                            ARCO CHEMICAL COMPANY
                           SALES VOLUME STATISTICS

                                  Three Months               Six Months
                                 Ended June 30             Ended June 30

                              1997          1996         1997          1996

    Core Products(B)           974           834        1,976         1,729
    (mm lbs.)

    Co-products:
     TBA and Derivatives       260           257          520           532
     (mm gals.)

     SM and Derivatives        627           691        1,335         1,350
     (mm lbs.)

    (B) Core products include PO, PO derivatives, TDI and ADI.

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