Eastman Chemical SWOT & PESTLE Analysis

Strength

1. Strong financial growth and strategies: Eastman has recorded a revenue growth of 10.37% year on year and has generated huge sum of free cash flow which they has utilized to increase their manufacturing capacity in order to build speciality product and capabilitie in the growth market. Its EPS grew by 13% and two of its segment delivered greater than 7% volume growth resulted in consistent earning and strong cash flow. It generated over $300 million of new business revenue and returned around $650 million in stock repurchase and dividends. Eastman has timed and again stood ethical and was recognised as most ethical company in 2017 by Forbes.

2. Strong technological advantage in diverse market: Eastman has been capitalizing on the diverse portfolio with its unique speciality businesses. They have the advantage of their significant scale and deep integration which provide sustainable growth and Eastman has been leveraging it to enter the new market. It has been improving their product mix, emphasizing on speciality business through their technological capabilities have helped Eastman to penetrate into niche markets. Its development of an innovative product such as Saflex VIEW ST, Eastman Impera and Eastman Naia cellulosic yarn and Avra performance fibers through in-house development and various mergers has helped Eastman to diversify in the market.

3. Diversifying Product Portfolio and Market Regions: Growth in residential construction: Eastman strategies to sell its diverse product to different market and geographies. It aims to work directly with the customer and get them to engage by breaking down of customer need and ensure that it meets the needs of their present customer and creates a niche market for its product portfolio. It has been involved in the number of acquisition which is additive to its existing product and results in increased earnings. Eastman majority sales of 44% come from North America. It has been improving its presence in Asia and Europe which accounts for 24% and 27% of its total revenue respectively. By end-use market, about 20% of its revenue is from transportation, 17% from consumable, 14% from building and construction, 11% from Industrial Chemical and Processing, 7% from fiber and rest from Food, Agriculture, Personal Care, Health, Energy, Electronics and other portfolios.

4. Strategic Advantage in its Fibre Segment: Eastman has a strong base of the customer in its fibre segment and using its knowledge in the industry, have been assisting their customer to maximize the efficiency and inturn develop a strong long-term relation which has benefitted them in repeating sales. Also, there were a limited number of competitors and a significant entry barrier like the high capital cost for the manufacturing infrastructure in the fibre segment, all these contributed to its significant profitability.

Weakness

This section is available only in the 'Complete Report' on purchase.

Opportunity

This section is available only in the 'Complete Report' on purchase.

Threat

This section is available only in the 'Complete Report' on purchase.

Political

1. Protectionist policies making voice globally: Eastman’s more than half of the sales comes from outside of North America i.e. from European and Asian Markets. The wave of protectionist policies and tax and other reforms have posed severe challenges for Eastman to conduct its businesses. Since Eastman has a signifiacant presence in Asian and Europea market rising tension in Korean Peninsula, US-China trade war, the breakup of the political-economic union(like Brexit), these could negatively affect their financial performance leading to greater tax and stringent laws in foreign areas affect its operating revenues and earnings.

2. Favored trading partners shifting business landscape: The countries where Eastman has been operational such as China has seen an ideological political shift. The influential politician and their policies have resulted in favoring few individuals and companies in the domain where Eastman Operates. This stiff challenges from uncertain situations have shifted the business landscape and gradually impacted Eastman performance and thereby its earnings.

Economical

1. Disruption in the supply of energy commodities: Eastman is dependent on certain strategic raw material and energy commodities and is using risk management tools like hedging and other measures to mitigate market uncertainty. Natural calamities, plant interruption or changes in governmental policies affect the supply which intern causes the disruption in cost and availability of these commodities. Major rise in prices of energy related raw materials such as coal, propane, ethane and other hydrocarbons may impact the company negatively.

2. Uncertainty in Foreign Exchange Rates: The increase political and economic uncertainty in the geopolitical environment has affected Eastman because of its exposure in foreign currency. For Eastman more than 60% of its revenue accounts from sales outside North America as of FY17. The Euro and the Chinese Yuan are two of the Eastman’s most exposed currencies and they are expected to weaken against the US dollar over the next two years in wake on the recent trade protectionsism policies which may lead to trade wars. Further, the recent surge in oil prices will impact the exchange rates in Asia and European region which inturn could affect Eastman revenues. To mitigate their risk they hedge it using derivative and non-derivative instrument thereby exposing them to hedging risk. The company incurred currency translation adjustment of loss of $381 million in FY16.

3. Growth in residential construction: Spending in residential construction in the US is rising and is not only limited to homebuilding, the home renovation also constitutes a major part of the residential construction. During the economic downturn when the construction industry was growing at a negative pace has moved to a rapidly growing industry in past 2-3 years since 2016. Eastman with its solid portfolio in building and construction where it posted nearly 14% of its revenue in FY17 has gained substantially from it, and with few trade barriers imposed by the local government on foreign suppliers has facilitated Eastman in growing its footstep in the industry.

Social

This section is available only in the 'Complete Report' on purchase.

Technological

Legal

This section is available only in the 'Complete Report' on purchase.

Environmental

This section is available only in the 'Complete Report' on purchase.