Eastman Reports Resilient Second-Quarter 2025 Financial Results Despite Challenging Market Conditions
Eastman Chemical Company announced its financial results for the second quarter of 2025, highlighting the resilience of its specialty businesses amid macroeconomic headwinds and operational challenges. The company faced continued softness across key end markets, an unplanned operational outage, and pressures from global tariffs, yet delivered solid performance in several segments and remained committed to long-term sustainability and disciplined cash management.
CEO Commentary
Mark Costa, Board Chair and Chief Executive Officer of Eastman, provided context for the quarter’s performance:
The second quarter presented significant challenges, and I am proud of the way our team fought to deliver resilient earnings in our specialty businesses,” said Costa. “As expected, the macroeconomic backdrop showed little signs of seasonal improvements across our end markets. In this context, we worked hard to mitigate tariff impacts on our global business through supply chain and commercial excellence.”
Costa noted that although certain economic conditions remained sluggish, Eastman was able to offset some negative effects through internal execution strategies and disciplined operations. A key setback during the quarter was an unplanned outage in the company’s Chemical Intermediates segment, which had a notable impact on earnings. However, the company continues to make strategic investments, such as its circular economy initiatives.
The second quarter also had an approximately $20 million impact in Chemical Intermediates due to an unplanned outage, compounding what continues to be tougher conditions for commodity markets,” Costa continued. “The Kingsport methanolysis facility continues to operate well, and we remain on track to produce greater than 2.5 times more recycled content than in 2024. Moving forward, we will continue to focus on cash generation with a disciplined approach to managing our cost structure, reducing working capital, and allocating capital.”
Segment Performance Overview – Q2 2025 vs. Q2 2024
Advanced Materials
Sales in the Advanced Materials segment declined by 2 percent compared to the second quarter of 2024. This decrease was primarily driven by lower sales volume and an unfavorable product mix.
Weak demand from major end markets such as building and construction and automotive original equipment manufacturers (OEMs) continued to suppress overall sales. These end markets have yet to show substantial recovery in 2025. However, Eastman noted a bright spot in specialty plastics, which showed volume growth and helped offset some of the overall weakness in the segment.
Earnings before interest and taxes (EBIT) for Advanced Materials declined due to the lower volumes and an increase in planned maintenance expenses. Despite the challenges, the segment demonstrated a degree of resilience through targeted growth in high-value applications and a focus on specialty product offerings.
Additives & Functional Products
The Additives & Functional Products (AFP) segment posted strong performance in the second quarter, with sales revenue increasing by 7 percent year-over-year. This increase was driven by several factors:
- A 4 percent increase in average selling prices, largely attributable to cost-pass-through mechanisms in customer contracts.
- A 2 percent increase in sales volume and product mix, supported by stable demand in key sub-segments.
- A positive impact from foreign currency exchange fluctuations.
The rise in volume was particularly notable in care chemicals and heat transfer fluids. These product lines benefited from consistent demand and project-specific fulfillments. As a result, EBIT for AFP improved meaningfully, driven by favorable pricing dynamics and improved cost management.
This segment’s strong performance underscores Eastman’s ability to deliver value in more stable, specialty-driven markets even while broader macro conditions remain uneven.
Fibers
Sales revenue for the Fibers segment dropped 17 percent compared to the same period last year. The decline was driven by a 16 percent decrease in sales volume/mix.
Lower demand for acetate tow, a material used in filtration products, was a primary contributor. Customers continued to reduce inventories, leading to lower ordering patterns across the industry. In addition, Eastman faced challenges stemming from global trade disputes that impacted textile sales, particularly into China. The combination of destocking, trade friction, and slower market demand weighed heavily on this segment.
EBIT also declined in tandem with reduced volumes, demonstrating the sensitivity of the Fibers segment to macroeconomic and geopolitical pressures. Management indicated that further adjustments may be needed to align production capacity with current market realities.
Chemical Intermediates
Chemical Intermediates experienced a 10 percent year-over-year decrease in revenue during the second quarter of 2025. This was due to two main factors:
- A 5 percent decline in sales volumes, partially attributed to an unplanned production outage that disrupted output and supply.
- A 5 percent decrease in average selling prices, reflective of ongoing weakness in commodity chemical markets and adverse pricing dynamics.
The production outage had a substantial impact, reducing EBIT by approximately $20 million. Additionally, the segment faced higher planned maintenance costs, further pressuring margins.
Commodity spreads declined during the quarter due to a combination of weaker pricing and increased costs for raw materials and energy. These unfavorable fundamentals highlight the continued challenges within this business line and reinforce Eastman’s strategy to emphasize specialty over commodity exposures.
Circular Economy Update: Kingsport Methanolysis Facility
A key part of Eastman’s long-term sustainability strategy is the advancement of its molecular recycling initiatives. The company’s Kingsport, Tennessee methanolysis facility continues to operate reliably and is on track to deliver a significant increase in recycled content compared to the prior year.
Eastman expects to produce more than 2.5 times the volume of recycled materials in 2025 than it did in 2024, reinforcing its leadership in circular economy innovation. This growth in recycled output not only supports customer sustainability goals but also aligns with global regulatory and consumer trends demanding greater use of recycled content in plastics and packaging.
Cash Flow and Capital Allocation
Eastman generated $233 million in cash from operating activities during the second quarter of 2025, compared to $367 million in the same quarter last year. The decline primarily reflects working capital pressures, maintenance expenditures, and the impact of the unplanned outage.
Despite the reduction in cash flow, Eastman maintained its commitment to returning capital to shareholders. During the quarter, the company returned $145 million through a combination of dividends and share repurchases.
The company’s capital allocation priorities remain unchanged:
- Investing in high-return growth projects, including circular economy and specialty innovations.
- Maintaining and growing the quarterly dividend.
- Reducing net debt to strengthen the balance sheet.
- Executing share repurchases as appropriate.
Management emphasized that cost discipline and working capital efficiency will remain central to cash generation efforts in the second half of 2025.
