Eastman Chemical (NYSE:EMN) executives used the company’s fourth-quarter and full-year 2025 earnings call to focus on operational actions aimed at stabilizing performance in several challenged businesses, while emphasizing that the primary swing factor remains end-market demand and customer ordering behavior.
Fibers: Stabilizing tow volumes, adding utilization levers
Management said the Fibers segment is a “top priority” after a difficult year, and emphasized that the earnings decline was not solely driven by acetate tow volume. CEO Mark Costa said roughly 40% of the segment’s EBIT decline stemmed from factors outside tow, including about a $30 million tariff-driven decline in textiles, a $20 million headwind from reduced internal demand for cellulosics, and about $50 million in higher utilization and energy costs.
Beyond tow, Costa outlined multiple levers aimed at improving utilization and earnings:
- Company-wide cost reductions of $125 million to $150 million (in addition to $100 million achieved last year), with a “decent portion” benefiting Fibers.
- Textiles growth expected to return “slowly,” with expanded efforts beyond Naia filament into staple fiber (a larger, more economic market such as denim and fleece) to help utilization.
- Progress in Aventa (currently in “corporate other”), with volume expected to build in applications such as food trays, cutlery, and straws.
On pricing and pass-throughs, management noted that some tow contracts include mechanisms that allow adjustments for changes in raw materials and energy, while textile pricing is market-based. Costa cautioned that in a weak environment investors should not assume broad pricing gains beyond contractual adjustments.
Chemical Intermediates: E2P project positioned as structural improvement
In Chemical Intermediates, Costa pointed to the company’s ethylene-to-propylene (E2P) project as the most significant step to reduce earnings volatility. He said the project would reduce exposure to bulk ethylene, replace higher-cost purchased propylene, and improve margins on the propylene side. Costa estimated the earnings improvement could range from $50 million to $100 million depending on spreads, with a payback of less than two years.
He also framed CI’s current profitability as influenced by weak demand and global trade dynamics. Costa said the North American market is more profitable than exports, and noted that Chinese “dumping” has pressured markets outside the U.S., while tariffs have offered some protection domestically. He added that more than half of CI output is consumed internally by Eastman’s specialty businesses, so recovering specialty demand would improve CI’s mix by replacing low-value exports with higher-value internal or specialty sales.
Management suggested current global pricing appears to be near variable cash costs for Chinese producers, raising questions about sustainability and potential future rationalization of higher-cost assets in regions such as Europe, South Korea, and Japan. However, Costa emphasized the company is not “banking on” a market structure improvement in the near term given uncertainty.
Demand, destocking, and the first-quarter setup
Asked to explain the year-over-year decline implied in first-quarter guidance, Costa said the comparison is difficult because the prior-year first quarter was a growth period before demand deteriorated later in the year following what he referred to as “April Liberation Day” and a shift in consumer and market conditions.
For early 2026, he described an improving volume backdrop from the fourth quarter into the first quarter, including a seasonal pickup in Advanced Materials and Additives & Functional Products, less impact from the earlier “pre-tariff inventory” dynamic discussed previously, and improved CI volumes due to fewer shutdowns and easing destocking. Offsets cited included higher energy costs, CI price pressure from contract resets, and a modest price decline in Fibers.
Advanced Materials: volume, utilization, and circular economy growth
In Advanced Materials, Costa and CFO Willie McLain highlighted year-over-year earnings drivers including volume growth (notably circular solutions), cost reductions flowing into the segment, improved utilization as volumes recover from prior inventory actions, and foreign exchange tailwinds. Management also cited headwinds including higher energy costs, modest pricing declines as Eastman shares raw material cost advantages with customers, and variable compensation.
On pricing, Costa said Eastman has managed price relative to cost well over the past four years, but indicated that after several years of retaining raw-material benefits, the company is now “sharing some of that raw material benefit” with customers, contributing to modest declines in Advanced Materials pricing even as variable margin is expected to improve due to volume and mix.
Circular: Kingsport debottlenecking and a paused second methanolysis project
On circular economy investments, management said work on a second methanolysis facility was paused after the company lost a Department of Energy grant. Costa said Eastman has already incurred some engineering expense for a planned Texas facility, but is not spending on engineering currently while it pursues a more capital-efficient approach. He added that the company is evaluating three options, including leveraging existing assets, and believes at least one option could be viable.
Meanwhile, the company is focused on a debottlenecking opportunity at Kingsport, which Costa said could increase capacity by 130% and improve returns before committing to a second plant. He linked customer interest to perceived quality degradation in mechanically recycled PET, describing how repeated melting degrades polymer chains and impurities accumulate due to the lack of purification. Chemical recycling, he said, “unzips” polymers to building blocks with purification, producing material comparable to virgin resin and enabling repeated recycling.
Management said rPET volume growth is expected to be a major driver of revenue growth, with Pepsi identified as one customer among several strategic brands ramping volumes.
Additional topics on the call included the discontinuation of certain European crop protection products due to a regulatory ban; growth of high-purity solvents in semiconductor-related applications (described as 20% to 30% growth off a small base with above-segment-average margins); and winter storm uncertainty, with management noting limited facility impacts so far but potential headwinds from natural gas prices, partially mitigated through hedging and operating actions.
About Eastman Chemical (NYSE:EMN)
Eastman Chemical Company (NYSE: EMN) is a global specialty materials company that develops, manufactures and markets a broad range of advanced materials, chemicals and fibers. Its product portfolio spans performance additives, functional products, and engineered plastics designed to enhance the durability, appearance and performance of end products across diverse industries.
The company’s main business activities include the production of specialty chemicals used in adhesives, coatings, building materials and consumer care applications, as well as high-performance plastics for packaging, automotive and electronics markets.
