Eastman Chemical Company on March 9 announced it is taking additional actions to further reduce costs by more than $100 million in response to the ongoing global economic recession. These actions, in addition to those announced in December, increase Eastman’s expected total cost savings in 2009 to more than $200 million.
Eastman is taking the following actions to achieve these savings:
· Reducing base pay for U.S. employees by 5 percent effective March 30, 2009, with equivalent cost reductions in bargaining unit sites and locations outside the U.S.
· Implementing a global targeted reduction in force of between 200 to 300 employees within the next four to six weeks
· Reducing non-critical maintenance costs
· Reducing logistics costs
· Further reducing discretionary spending
“The severity of the current economic environment led to the actions we are announcing today,” said Brian Ferguson, chairman and CEO. “Despite our expectation that sales volume will continue to be at depressed levels, we remain committed to taking the necessary actions to deliver solid operating cash flow in 2009 that will more than support both our dividend and capital expenditures.”
In addition to taking actions to reduce costs, the company lowered its budgeted 2009 capital expenditures to between $300 and $350 million. The company also expects to generate approximately $100 million of cash from working capital in 2009, assuming continued difficult economic conditions and raw material and energy costs similar to current levels.
Commenting on the outlook for full-year 2009 earnings, Ferguson said, “While visibility into global demand continues to be limited, the actions we are taking to reduce costs position us to better weather the storm. Assuming a modest improvement in demand that increases our capacity utilization from the current rate of approximately 71 percent to between 75 to 80 percent for the remainder of the year, we expect our full-year 2009 earnings per share will be between $2.00 to $3.00 excluding charges related to cost-cutting actions.”
The cost-reduction actions announced on March 9 will result in a first-quarter 2009 pre-tax restructuring charge of approximately $30 million.