Chemicals Post Best Year Yet
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the newsmagazine of the chemical world VOLUME 38, NUMBER 6 FEBRUARY 8, 1960
Chemicals Post Best Year Yet Record-breaking sales and profits in 1959 set the stage for further gains during the year ahead
IF YOU ARE looking for a quick two-word summary of 1959, "most satisfac-tory" probably will do. That is how Hercules Powder president Albert E. Forster described it in reporting record sales and earnings to stockholders. His view is echoed by a raft of other com-panies now reporting last year's results.
For many of the companies that have already added up preliminary figures on annual results, sales and earnings climbed to all-time highs. Annual re-ports will make pleasant reading es-pecially when contrasted with the re-cession dampened figures of the year before. Several firms did much better
than they were willing to predict at this time last year.
Nevertheless, 1959 ended on a slightly muted note. For while the year itself was a record breaker, its final quarter was a bit of a disappointment. Sales held up well. But profits dropped, in many cases to the lowest
Earnings Bounced Back Strongly Last Year
Rohm & Haas
Smith Kline & French
a Includes other operating revenue. b Excludes nonrecurring TOM equal to 4 cents i t For year ended Nov. 30.
+ 11 + 8
+ 2 0
+ 2 3
+ 2 0
+ 2 7
+ 2 2
Change from 7 958
Earnings /Share 1958 1959
+ 11% $ 3.47
+ 4 6
+ 3 6
- 3 4
+ 3 1
+ 7 5
+ 11 + 3 4
+ 6 8
+ 2 6
- 1 8
+ 4 2
+ 2 5
+ 4 1
+ 5 9
+ 2 0
+ 2 3
+ 3 7
Profits, % of Sales
FEB. 8. I 9 6 0 C & E N 1 9
Dow Turns to Nylon-6 Will build plant in Virginia; plans to be on stream in mid-1961, aiming for tire cord market
levels of the year and below the strong showing turned in by 1958's final three months.
The steel strike gets much of the blame for pulling down the latter part of the year. Union Carbide president Morse G. Dial notes that the strike hit sales of alloys, electrodes, and gases to steel producers during the third quarter and then had a delayed effect on sales of chemicals and plastics to indus-tries hampered by steel shortages. As a result, Carbide's earnings for the last half of the year ran about 30 cents a share behind first-half profits.
Allied Chemical cites another factor. Its fourth quarter, although depressed by the impact of the strike, showed 7% higher sales than in the same period of 1958. But profits fell 4% behind the 1958 period because of higher costs. Allied had to substitute more expensive raw materials for coal chemicals it usu-ally obtains from the steel industry.
Companies doing business with steel producers were not the only ones to run into a slight snag in the final quar-ter of last year. American Viscose says fourth quarter earnings dropped to $1.8 million, about $1 million under 1958's last quarter; Chemstrand reports final quarter profits of $3.2 million compared with $6.6 million the year before. Here again, the over-all impact of the steel strike on the nation's economy supplies part of the answer, as does the reduc-tion of prices for rayon and nylon tire cord.
Optimistic Outlook. With steel mills again operating close to capacity and the nation's economy in high gear, chemical company executives are just about unanimous in predicting further gains for 1960. But they are wary about being pinned down to actual dollars-and-cents forecasts. The first half should be very strong. But the second half poses a lot of question marks.
Hercules' Forster sees 1960 as a whole as a "very good year." Hercules expects sales to fop last year by some-thing around 8 to 10%, with profits do-ing a bit better. (The company op-erated at close to 85% of capacity last year, about as good as it can expect.) Projections of other companies fall roughly along parallel lines.
One problem facing the industry: Can profit margins be maintained or in-creased? With plants operating at high levels and sales rising, margins look safe. But it will be touch-and-go whether operating efficiency and prices can keep pace with higher costs.
A N Y QUESTIONS about how far Dow will go with fibers are answered now. The company jumped into the nylon-6 picture last week with plans to build a 12 million pound-a-year plant at Wil-liamsburg, Va. Construction will start next month, and the plant is due on stream late next year.
Nylon-6 is made from caprolactam, and Dow will get this from the Dow Badische plant being built in Freeport, Tex. Dow will use the H. Zimmer Co. (Frankfurt, Germany) process. Zim-mer will also supply the equipment for the plant.
Dow's move will give the firm the last side in the textile marketing triangle apparel, home furnishings, and in-dustrial fibers. Dow competes in the apparel market with Zefran, an acrylic fiber (85% acrylonitrile) made at Wil-liamsburg. Plant capacity: 12 million pounds a year. It supplies the home furnishings field with Rovana, a saran filament (vinylidene chloride copoly-mer), and with Lurex, a metallic yarn with either a butyrate or polyester fiber. Nylon-6 will come along to put Dow in the industrial fiber business. Most of Dow's nylon output will go for yarns used in tires.
The new plant will in no way affect operations at the Zefran plant, which has been on stream since mid-1958. The new plant will need about 250 new employees, many of whom will be tech-nical people recruited by Dow.
Added Twist. An added wrinkle to Dow's latest move is the stepped-up race for nylon-6 capacity. Late last year, Firestone announced plans to build a 12 million pound-per-year plant at Hopewell, Va. The plant is under construction and should be on stream late this year. Firestone will also use the Zimmer process and will buy its caprolactam. When running, the plant will supply 15% of Firestone's nylon tire cord needs. The firm plans to sell nylon-6 for other uses later.
Last month Allied Chemical said it would triple its nylon-6 capacity at Hopewell. The plant can make 24 million pounds a year now; Allied will have it up to around 75 million pounds by mid-1961. About 65% is earmarked for the tire cord market; the balance will go to other outlets such as indus-
trial conveyor belts, marine hawsers, webbings, and coated tarpaulin fabrics.
Allied makes its own caprolactam in an 84 million pound-a-year plant at Hopewell. With nylon-6 capacity go-ing up, Allied will also add more facili-ties for caprolactam.
Lush Market Ahead. The rush for more nylon-6 capacity has participants keyed up over vast market potentials for auto tire cords. Target: 300 mil-lion pounds by 1965.
This year, production of nylon-66 (made by Du Pont and Chemstrand) and nylon-6 for tire cords should near 140 million pounds. It was 120 mil-lion pounds in 1959. Capacity for ny-lon for auto tire cords (840 denier) stands at 190 million pounds. The total domestic capacity for nylon fiber is 437 million pounds, and it breaks down as follows:
840 and over 198 200 to 840 48 Below 200 155 Staple 36
Since coming on the tire cord scene in 1947, nylon has gained steadily at the expense of rayon cords (which all but displaced cotton) and now has about 30% of the tire cord market. By 1965, nylon producers hope to have nearly 75%. The big market would come if nylon should break into original equipment tires. Today, original equip-ment tires are still in the rayon camp.
Nylon cords get most use today in the replacement tire markets and have about half the business. However, ny-lon is used in original tires for aircraft, trucks, and off-the-road vehicles.
Today, rayon and nylon tire cord producers are waging an intense battle for consumer preferences. Also, both sides are staging periodic price skir-mishes in hope of gaining the favor of tire cord users. The latest price cut came in December when Du Pont, fol-lowed by Chemstrand and Allied, dropped prices of 840 denier yarn to 97 cents a pound and reduced prices of other grades, too. Rayon makers coun-tered by dropping prices to 50 to 57 cents a pound for corresponding grades.
2 0 C&EN FEB. 8, I960
BEFORE THE STORM. American Home's Alvin Brush (right) and Bethuel Webster, legal aid, face drug probers in the Senate's marble-columned caucus room
Kefauver Hits Tranquilizer Prices Tranquilizer hearings end as Sen. Kefauver says makers invite price control legislation
F ALL THE charges and countercharges hurled during Senator Estes Kefauver's (D.-Tenn.) just-finished investigation of tranquilizer prices, one in particular stood out. It was Sen. Kefauver's charge that pricing policies on tranquilizers were inviting government price control by popular demand.
"I don't think government control is the right approach in reducing drug prices, but pressure on Congress is being made greater and greater," Sen. Kefauver told tranquilizer makers during the second round of hearings conducted by the Subcommittee on Antitrust and Monopoly Legislation.
It's much too early to tell what, if any, legislation will result from Sen. Kefauver's current drug probe. Since he became chairman of the subcommittee in 1957, 32 different hearings have been conducted. As a result, two laws (one concerning Federal Trade Commission orders, the other the meat packing industry) have been passed.
For the most part, drug spokesmen appearing before the tranquilizer hearings were well prepared to meet any accusations tossed at them by the subcommittee. Many didn't hesitate to challenge the subcommittee's facts and
figures, especially when they concerned profits. Rising to the defense of the drug makers was Sen. Everett Dirksen (R.-Ill.). "Senators should be more careful in dishing out facts without qualifications," Sen. Dirksen warned.
Although Sen. Kefauver appears to be convinced that something is wrong with the drug industry's operation, he feels that voluntary price reductions would be better than legislation. Why, for example, he asks, does the consumer have to pay 10.8 cents for Carter Products' meprobamate tranquilizer, Mil-town, when Carter's production cost is only 0.7 cent per tablet?
Henry H. Hoyt, president of Carter, refuted this charge in much the same way as Walter A. Munns, president of Smith Kline & French, Alvin G. Brush, board chairman of American Home Products, and T. F. Davies Haines, president of Ciba Pharmaceutical Products, refuted similar charges made against them during this session's tranquilizer hearings. Said Mr. Hoyt: "Carter doesn't regard the retail price of Miltown as excessive and the company doesn't believe that a price reduction is warranted." All tranquilizer makers who testified cited the high cost of mar
keting as one of the chief factors contributing to their products' retail cost.
Another Ordeal. While Mr. Hoyt was explaining Carter's Miltown pricing policy before the subcommittee, Attorney General William P. Rogers, in a separate action, charged Carter Products and American Home Products with unlawfully conspiring to monopolize trade in "mild" tranquilizers. Both companies were named as defendants in a civil antitrust action filed in U.S. District Court (New York).
Carter and American Home, which markets Equanil, a meprobamate, under a Carter license, were charged with agreeing to exclude all others from the manufacture and sale of meprobamate tranquilizers; agreeing to fix prices for sale in the U.S. on meprobamate tranquilizers; and discouraging and impeding progress in the development of drugs in which meprobamate might be an ingredient. In 1958, about $40 million worth of meprobamate tranquilizers were soldtwo thirds by American Home, one third by Carter. Both American Home and Carter denied that they had committed any of the violations charged.
Foreign Question. Another question frequently asked tranquilizer makers by the Kefauver committee: Why can druggists in foreign countries buy your product at much lower prices than U.S. druggists? Mr. Hoyt said that if his company didn't sell Miltown at prices that were in line with a country's standard of living, Carter would price itself out of foreign markets. Sen. Kefauver's reply: "In other words, you charge what the traffic will bear according to the standard of living."
American Home's Mr. Brush also faced some accusations on foreign prices. Sen. Kefauver argued that if American Home set its foreign Equanil prices according to the standard of living, then why didn't the company get its domestic prices down to the standard of living of people living on Social Security? To such charges Mr. Brush retorted sharply, "It seems to me, if the drug industry undertakes to solve all the social-economic problems in the U.S. we'd be in serious trouble!"
Brief Calm. Sen. Kefauver's hearings on administered prices in the drug industry are far from being over. Next hearing, to take place late this month, will cover drug prices in general. One witness scheduled to testify before the subcommittee is Dr. Austin Smith, head of the Pharmaceutical Manufacturers Association.
FEB. 8, I960 C&EN 2 1
Chemicals Post Best Year YetDow Turns to Nylon-6Kefauver Hits Tranquilizer Prices