Eastman warns of below-forecast earnings

KINGSPORT, Tenn. – Fourth-quarter earnings per share will be below previous forecasts for Eastman Chemical Co. despite strong sales volume and increased selling prices, the marine industry supplier said in a press release this morning.

Higher raw material and energy costs were not offset during fourth quarter 2004, particularly for the Eastman Division. The company’s raw material and energy costs, including for paraxylene, ethylene glycol and propane, are expected to have increased by over $100 million in fourth quarter compared with third quarter 2004, which is substantially above the company’s and external consultants’ previous forecasts.

As a result, Eastman said it expects that fourth-quarter 2004 earnings per share, excluding asset impairments and restructuring charges, gains from the sale of a business and an expected favorable impact of a tax settlement, will be below the low end of the $0.42 to $0.63 estimated range previously provided on Oct. 28.

Regarding first quarter 2005, the company said that sales volume is expected to remain strong and that the unprecedented increases in raw material and energy costs are predicted to moderate. Also, additional selling price increases are expected to be implemented during first quarter in order to offset the existing higher raw material and energy costs.

The company, therefore, expects that profit margins will increase substantially in first quarter 2005 from fourth-quarter 2004 levels.

Eastman will announce fourth-quarter and year-end 2004 sales and earnings on Jan. 27. The company will host a conference call with industry analysts on Jan. 28 at 8:00 a.m. EST. To listen to the live Webcast of the conference call, go to www.eastman.com, investors, event information, audio archives. To listen via telephone, the dial-in number is 913-981-5571, passcode number 409787.

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