Eastman earnings down in Q3, though recycled-content products show progress

Eastman Chemical Co., Kingsport, Tennessee, recently announced its financial results for the third quarter of this year, noting sales revenue across its various business segments decreased compared to the same quarter of 2024.

Overall, the company reports a sales revenue decrease of 11 percent ($2.2 billion) in the quarter compared to the same time frame last year ($2.4 billion), due to 10 percent lower sales volume/mix and 1 percent lower selling prices. The company says the lower sales volume/mix was driven by weakness in consumer discretionary end markets as well as customer unwinding of tariff-related inventory prepositioned in the first half of the year, especially in advanced materials and fibers.

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Eastman’s Advanced Materials segment posted a 7 percent decrease in sales revenue due to lower sales volume/mix. The company says the lower sales in specialty plastics primarily is driven by weakness in high-value consumer discretionary end markets, as well as customers leveraging prepositioned inventory to minimize the impact of tariffs on consumer prices and adjust to consumer weakness. The company says underlying trends in automotive sales were relatively stable for its advanced interlayers product line and slightly better than originally expected, but auto aftermarket sales in its performance films product line were lower as consumers “are choosing not to buy accessories or are trading down due to affordability issues.”

In its Additives & Functional Products segment, Eastman reports sales revenue declined 4 percent year over year due to 8 percent lower sales volume/mix, partially offset by 3 percent higher selling prices.

The company says the lower sales were driven by the timing of heat transfer fluid project completions and continued weak demand in the building and construction and auto refinish end markets. Higher selling prices were driven by cost-pass-through contracts.

In its Fibers segment, Eastman says sales revenue dropped 24 percent, driven by lower acetate tow volume due to ongoing customer inventory destocking relative to last year, industry capacity share adjustments and continued lower textile sales into China due to the “global trade dispute.”

Eastman’s Chemical Intermediates business reports a 16 percent decrease in the quarter due to 8 percent lower sales, which the company attributes to continued weak market demand in the North American building and construction end market.

Commenting on the earnings, Eastman Board Chair and CEO Mark Costa says the results reflect actions taken to reduce inventory and prioritize cash generation.

“With the weak macroeconomic environment persisting, our focus on cash generation, disciplined capital allocation and structure cost reduction is more important than ever,” Costa says, adding that, as expected, the company realized a slowdown in orders due to “normal seasonality” and customers unwinding inventory to avoid tariff risk in a “weakening consumer environment.”

“In this context, our teams demonstrated continued commercial excellence in defending both prices and market share,” he says.

Costa also notes that Eastman has made “good progress” on securing Renew recycled polyethylene terephthalate (rPET) contracts for a significant ramp up in sales volume next year. “We are taking a number of actions expected to create earnings growth next year and position the company for a strong recovery when the economy stabilizes.”

A fuller picture

Commenting on the outlook for the fourth quarter and full-year 2025, Costa says Eastman expects a “greater than normal” seasonal decline in volume as the macroeconomic environment continues to be challenging, especially in the consumer discretionary markets (building and construction, consumer durables and auto aftermarket).

“We see signs of increasing consumer caution, including value-oriented trade-down behavior,” Costa says. “Our customers through the retailers are also continuing to unwind inventory purchased and prepositioned geographically in the first half of the year to mitigate tariff risks and reduce the impact on consumer prices. We do expect most of this pre-buy inventory to be depleted by end of year.”

Costa continues that “against this dynamic backdrop,” the company remains focused on “controlling what we can,” including driving cash flow. “We delivered strong cash flow in the third quarter with our inventory actions and aggressive cost management. We expect price-cost stability, as our commercial teams continue to demonstrate excellence in defending our prices and market share, based on the innovative value of our products.”

Costa says the company also expects a modest increase in revenue from its Kingsport methanolysis facility as it ramps up. The company also is on track to reduce costs by more than $75 million this year and says it plans to reduce structural costs by approximately $100 million in 2026.

“We expect lower planned shutdown costs and a modest asset utilization tailwind, after substantially completing our inventory reduction actions in the third quarter,” Costa says, adding that when the factors are put together, the company projects adjusted earnings per share for full-year 2025 to be between $5.40 and $5.65 and for operating cash flow to approach $1 billion.