New business for Eastman’s circular platform in durables, cosmetics and beverage packaging set a record during the first quarter of the year, executives said during a quarterly earnings call.
However, CEO Mark Costa cautioned that this did not indicate an economic recovery. “To be clear, we’re not saying the end market is improving. We’re just picking up more market share in durables or in cosmetic packaging with our value proposition,” he said during the May 1 presentation.
“Even though there’s a lot of stress in the marketplace right now with the Middle East conflict, the end-market demand situation hasn’t really changed dramatically,” Costa said. He also noted that discretionary consumer spending on durable goods is “still relatively challenged.”
However, “customers are still fortunately very focused on the value of renewed content and interested in buying it.”
In addition, with rising prices for virgin PET helping close the gap with RPET, Eastman sees its US manufacturing footprint as a competitive advantage for providing supply security. Nevertheless, PET demand was strong even before crude oil prices rose, Costa said.
For example, PepsiCo and others “wanted to start buying sooner than their original contract obligations because they saw the value proposition we have with our [Tritan] Renew products. So our superior clarity, our superior quality, our superior performance and how the product actually performs was recognized and they wanted to start building and using that material this year.”
Revenue for Eastman’s circular plastics business has two components, Costa said: recycled content added to Tritan products, such as cosmetic packaging in the specialty business, and new applications for RPET from the Kingsport methanolysis plant.
Because of the exposure to reduced consumer spending in 2022-2025, the specialty end markets have been challenged, “so the rate of growth we’ve seen on the specialty side has not been as good as we would have expected” as Eastman ramped up the plant over the past two years, Costa said.
During the quarter, higher raw material and distribution costs pushed up selling prices for Eastman products, but plant run rates improved significantly.
The Advanced Materials segment, which includes RPET, saw strong revenue and EBIT growth from the methanolysis plant, along with strong growth in specialty plastics from new application wins and the end of customer inventory de-stocking. The segment saw modest growth from innovation.
Overall, however, Advanced Materials reported Q1 revenue of $715 million, lower by $4 million or 0.5% on the year, with adjusted EBIT of $69 million, lower by $47 million or 40.5% on the year.
