Eastman to decide PET unit’s fate this year, mulls additional Tritan sites

(Kingsport, TN) to reassess its portfolio, with the previously announced strategic review of its PET unit to be concluded this summer. On April 23, the company announced that it was considering a sale of that business, hiring financial management and advisory firm Merrill Lynch to assess its options.

At a May 13 event in Kingsport to celebrate the official opening of its new Tritan copolyester production line, Mark Costa, executive VP specialty polymers, coatings, adhesives and chief marketing officer told PlasticsToday that Eastman hopes to make a decision about the unit's fate this year. "We have been clear that the PET business obviously hasn't performed to our expectations," Costa said. "We have launched a strategic process to examine who would be the best owner of that business, whether it's us or someone else. We think it's a very attractive business, and there is very strong interest in that business as we run that strategic process."

Going back to 2006, Eastman's PET business has lost $6 million, $53 million, $29 million, and $62 million over the last four years, according to financial statements from the company. During that same time, the company sold its PET manufacturing facilities and related business in Mexico and Argentina in the fourth quarter of 2007. In that same quarter, it entered definitive agreements to set its PET and terephthalic acid (PTA) manufacturing sites in the Netherlands, and a PET production site in the United Kingdom. Earlier in the year it sold off its PET manufacturing site in Spain.

In the U.S., Eastman made a sizable investment in its Columbia, South Carolina PET manufacturing site, increasing operating rates through debottlenecking process and the implementation of its IntegRex PET manufacturing technology, which it uses to make its ParaStar PET material.

Eastman's PET business falls under its Performance Packaging unit, which in addition to resin, manufactures carpet fibers. The company does have some PET manufacturing in Kingsport, according to an Eastman representatives, but it's for specialized products like amorphous PET used in injection molding.

Costa acknowledged that a divestiture of its PET business would impact sales, but given its performance of late, could ultimately help its bottom line. "Certainly [PET] is a material part of our revenue," Costa said, estimating that it's similar in size to Eastman's Specialty Plastics business. "It's had negative earnings, so there's not going to be a significant earnings hit associated with the potential divestiture, and that would be the reason we'd choose to do that if we choose to do that."

Costa said Specialty Plastics, which includes Tritan, is Eastman's highest growth segment out of its five business units. In 2009, the entire company had $5 billion in sales revenue, with Specialty Plastics accounting for $749 million. Given growth within the unit, fueled in large part by the market acceptance of Tritan, Costa said the company will also weigh expansion.

"As [Tritan] demand is increasing significantly," Costa said, "we're now working on not only how do we squeeze as much production our of current investments, but where will build the next plant, both monomer and polymer, to make sure we're positioned well to grow with the market." Costa said Eastman will weigh all its site selection options but added that, "It wouldn't surprise me if it turns out to be in Asia." At this point in time, Eastman has a copolymer line in Malaysia and a chemical facility in Singapore, in addition to some joint ventures in the region, including in China.