Eastman Releases 2025 Third Quarter Financial Report

Due to a 10% decline in sales/production mix and a 1% decline in sales prices, sales revenue decreased by 11%. The decline in sales/production mix is attributed to weak demand in the non-essential consumer goods end market and customers digesting inventory accumulated in the first half of the year to avoid tariff risks, a situation particularly evident in the specialty materials and fibers business.

The main reason for the decline in operating profit before tax is the decrease in sales/product mix across all business operations, as well as the significantly reduced capacity utilization aimed at promoting cash flow generation. Our specialty products business maintained a stable price-cost ratio, while the chemical intermediates business faced competitive margin compression. Due to the implementation of more proactive inventory management measures, the adverse impact of capacity utilization was slightly higher than expected. However, we partially offset these negative factors by reducing our cost structure.

Sales revenue decreased by 7% due to a decline in sales volume/product mix.

The main reason for the decline in sales/product mix of specialty plastics is the weak demand in the high-value non-essential consumer goods end market. Additionally, customers are using pre-positioned inventory to reduce the impact of tariffs on consumer prices and to cope with sluggish consumption. In terms of automotive-related business, the basic sales trend of our advanced interlayer product line is relatively stable and slightly better than initially expected. However, the sales of the high-performance film product line in the automotive aftermarket have declined because consumers are either choosing not to purchase accessories due to purchasing power issues or are turning to lower-priced products. Thanks to excellent commercial execution in securing prices and market share, prices have remained generally stable.

The main reasons for the decline in earnings before interest and taxes (EBIT) are the decrease in sales/product mix, lower capacity utilization (including proactive inventory reduction measures), and rising energy and tariff costs.

In the third quarter of 2025, cash generated from operating activities amounted to $402 million, compared to $396 million in the third quarter of 2024. The expansion of cash flow was mainly due to measures in managing working capital, including inventory reduction of $204 million. The company returned $146 million to shareholders through dividends and stock repurchases. Available cash in 2025 will be prioritized for capital expenditures, quarterly dividend payments, and reduction of net debt.

Costa said regarding the outlook for the fourth quarter and the entire year of 2025: "Considering the macroeconomic environment remains challenging, especially in the non-essential consumer goods market (such as building and construction, durable goods, and the automotive aftermarket), we expect a decline in sales greater than the normal seasonal range. We have observed signs of increasingly cautious consumer behavior, including a trend towards cost-effective consumption downgrade. Customers through retail channels are also continuously digesting the regionally pre-stocked goods from the first half of the year, aimed at avoiding tariff risks. We expect most of these pre-purchase inventories to be depleted by the end of the year."

In this rapidly changing environment, we will continue to focus on controllable factors, particularly the ongoing creation of robust cash flow. In the third quarter, we achieved strong cash flow through inventory adjustments and proactive cost management. We expect the price-cost ratio to remain stable as our business team demonstrates exceptional capability in stabilizing prices and solidifying market share through the innovative value of our products. At the same time, the Kingsport methanol decommissioning facility is expected to contribute a slight increase in revenue. By 2025, we are on track to achieve cost reductions exceeding $75 million after accounting for inflation, with an additional anticipated structural cost reduction of approximately $100 million in 2026 (also adjusted for inflation). As the inventory reduction measures from the third quarter are essentially completed, we expect planned production shutdown costs to decrease, and capacity utilization to recover slightly. In summary, we anticipate that the adjusted earnings per share for the full year of 2025 will be between $5.40 and $5.65, with operating cash flow expected to approach $1 billion.