Eastman Chemical Co.’s third-quarter operating results took a $15 million hit related to an August electric outage that temporarily shut down its plant just outside Longview and left about 85,000 Northeast Texans without power.
Mark J. Costa, chairman and CEO of the Kingsport, Tennessee, company, brought up the incident early in his remarks to analysts during an October conference call discussing the company’s financial performance.
“We had solid results in the third quarter, despite a challenging macroeconomic environment which has deteriorated in the second half of this year. EPS (Earnings per share) for the third quarter was similar to the second quarter, especially considering the local electrical outage that caused a shutdown at our Longview site,” he said.
Curt E. Espeland, Eastman’s executive vice president and chief financial officer, said the company saw decreased earnings before interest and taxes, resulting from “increased plant shutdown costs and a local power disruption in the Longview, Texas, manufacturing site.”
“Taken together, these costs were about a $30 million headwind for Chemical Intermediates in the quarter, $15 million of which was due to the unplanned power outage,” he said.
The power failure Aug. 18 caused power voltage fluctuations. Plumes of smoke billowed from the Eastman plant as a result of the unplanned outage.
Flaring that occurred during the shutdown produced “black smoke due to the loss of steam during the power interruption,” a company representative previously said. The plant was running again within five days.
AEP-Southwestern Electric Power. Co. officials have said the outage was a result of vegetation that came into contact with power lines, combined with summer heat and high power use.
Eastman’s third quarter results included about $2.3 billion in revenues, compared with about $2.5 billion in third quarter 2018. Net quarterly earnings were $266 million, or diluted earnings per share of $1.93, compared with net quarterly earnings a year ago of $412 million, or diluted earnings per share of $2.89.
Costa said the company is taking action to “offset a decline in volumes,” better manage costs and “accelerate our innovation programs.”
The U.S.-China trade dispute also is affecting the company, he said.
“In particular, we can see the impact of key consumer discretionary end markets slowing, including transportation, consumer durables and electronics,” he said.
“As a result, volume has come in lower than expected, which in turn has resulted in lower capacity utilization. In an environment like we are in now, we remain focused on what we can control, closing new business revenue, reducing costs and generating strong free cash flow.”