NEWTOWN SQUARE, Pa., July 18 /PRNewswire/ -- ARCO Chemical Company
(NYSE: RCM) today reported second quarter net income of $81 million, or $0.84
per share, compared with $106 million, or $1.10 per share in the first quarter
1996 and $150 million, or $1.56 per share, in the second quarter 1995.
Revenue for the second quarter 1996 was $959 million compared with $982
million in the first quarter and $1,149 million
a year ago.
    Commenting on the quarter, Alan R. Hirsig, president and chief executive
officer, said, "Our second quarter results reflect a seasonal downturn in the
sale of aircraft deicing fluids and higher costs for several of our key raw
materials.  In addition, continued weakness in European economies and sluggish
demand for household furnishings, a key market for many of our products, have
led to lower prices for certain propylene oxide (PO) derivatives since the
first quarter.  While we remain a strong competitor and a low-cost producer of
our core products, a soft economic climate and
the depressed global market for styrene are currently affecting our earnings."
    The primary factors contributing to the drop in net income from the first
quarter 1996 were:
    -- Lower volumes of propylene oxide (PO) and derivatives, which were
largely due  to a seasonal drop in demand for aircraft deicing fluids.  PO and
derivatives volumes decreased 7 percent to 794 million pounds for the quarter.
    -- Continuing weak demand for polyurethane and polyester resins which
resulted in lower prices for PO derivatives, including polyols and glycols.
Prices in Europe and Asia were most affected.
    -- Higher costs for propylene and ethylene, key raw materials in the
production of PO and styrene.  For example, U.S. market prices for both
materials increased nearly 20 percent during the quarter.
    Comparing results with the second quarter of 1995, net income fell by $69
million due to decreased profitability of styrene, in particular, as well as
MTBE.  Volumes for PO and derivatives decreased 7 percent due, in part, to the
presence of a new competitor in the U.S. market.  The impact of lower volume
was substantially offset by higher prices and margins in the second quarter
1996.
    Weak demand for styrene in Europe and Asia coupled with increased
worldwide production capacity resulted in an over-supply which led to lower
selling prices and margins over the past year.  Market data indicate that spot
styrene prices fell by nearly
60 percent during this time.  Industry analysts project that worldwide demand
for styrene will grow 4-5 percent annually over the next decade.  However, the
company believes that additional new industry capacity will likely keep near-
term pressure on styrene margins.
    ARCO Chemical is actively pursuing strategic alternatives that will reduce
the impact of economic cycles on the company's earnings.  These initiatives
include styrene equity agreements, long-term margin-stabilizing contracts for
styrene, and increased PO integration through expanded derivative markets.
Fifty-four percent of the company's
PO was internally consumed for the production of derivatives during 1995.  The
company expects that PO integration will reach 70 percent by 2000.
    "While this has been a disappointing quarter, we are confident ARCO
Chemical's leading market position and focused investment strategies will
continue to prove successful.  Our balance sheet today is strong and cash flow
is healthy.  Barring significant change, I expect our dividend level to be
unaffected by these current conditions.  Looking to the future, our research,
capital spending and strategic initiatives are concentrated on developing the
technologies and markets which will fuel attractive growth prospects for
propylene oxide and its growing family of value-added derivatives worldwide,"
said Hirsig.
    Consistent with plans to grow products and markets for value-added PO
derivatives, ARCO Chemical is expanding PO capacity in Channelview, Texas and
building a grassroots PO plant in Rotterdam, the Netherlands for late 1999
start-up. Additional low-cost polyol capacity is also planned.  ARCO Chemical
currently has approximately 40 percent of the world's PO capacity.
    During the second quarter the company announced its intention to sell its
plastics unit to NOVA Chemicals, Inc.  That transaction is expected to be
completed in the third quarter.
    ARCO Chemical Company is a leading manufacturer and marketer of propylene
oxide and derivatives, intermediate chemicals and engineering foams and
resins. Its products are used in a wide range of consumer goods, including
automotive components, cushioning, paints and coatings, protective packaging,
antifreeze 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)
                                       1996     1995     1996     1995
    Total revenues                     $959   $1,149   $1,941   $2,290
    Costs and other operating expenses  743      822    1,473    1,666

      Gross profit                      216      327      468      624

    Selling, general and
      administrative expenses            70       69      133      133
    Research and development             21       20       39       38

      Operating income                  125      238      296      453

    Interest expense                    ( 21)   ( 22)    ( 43)    ( 44)
    Other income, net(A)                  9       11       18       16

      Income before income taxes        113      227      271      425

    Provision for income taxes           32       77       84      149

      NET INCOME                        $81     $150     $187     $276

    Net income per common share        $.84    $1.56    $1.94    $2.87


    (A) Primarily interest income, results from equity investments, and
foreign exchange gains and losses.
    The effective full year tax rate for 1996 is expected to be 31%.
    Depreciation/amortization expense for the six months ended 6/30/96 and
6/30/95 was $109 million and $119 million, respectively.

                           SALES VOLUMES STATISTICS

                          Three Months         Six Months
                          Ended June 30       Ended June 30
                                     (Unaudited)
                          1996      1995      1996      1995
    PO and Derivatives     794       853     1,647     1,790
        (mm lbs.)

    TBA and Derivatives    257       301       532       590
        (mm gals.)

    SM and Derivatives     691       650     1,350     1,349
        (mm lbs.)