Thursday, January 15, 2015

Goldman sees chemical companies' profits down

This seems relevant to some readers of the blog. Via Bloomberg Businessweek:
Goldman Sachs Group Inc. cut earnings estimates at seven U.S. chemical makers to reflect a stronger dollar and product prices that are falling with crude oil. 
Goldman lowered 2015 profit estimates 20 percent at Dow Chemical Co. and LyondellBasell Industries NV , 19 percent at Westlake Chemical Corp. and 6 percent at Eastman Chemical Co., analysts led by Robert Koort said in a note yesterday. The changes reflect the impact of falling oil prices on ethylene and related plastics. Estimates for 2016 were also reduced. 
“Despite this cut, we still see downside risk to our 2015 EPS estimates if we use the current spot Brent oil price or our commodities team’s new $50 per barrel Brent oil forecast for 2015,” Koort said in the note.
 That sounds like bad news for R&D hiring at these companies, we'll have to see if that's the case. 


  1. It is the case. My company, which is affected by the factors cited by Goldman Sachs, just went through a round of lay-offs this week. Management cited revisions in growth projections for this year. It's my first time seeing something like this. The research center felt like a funeral parlor.

  2. When prices fall (for both raw materials and finished products) companies have to make huge write-offs on their inventory. This creates substantial paper losses that are not directly reflective of operations and sales. Either way, it gives management an excuse to engage in the re-orgs and layoffs that they use to justify their bloated salaries.