A report from Fitch Ratings Inc states that it has affirmed the long-term issuer default rating (IDR) and senior unsecured debt ratings of Eastman Chemical Company (EMN) at BBB. Fitch has also affirmed the company's short-term IDR and commercial paper rating at F2. The rating outlook is stable.
EMN's ratings reflect the company's strong free cash flow (FCF); diversified portfolio of specialty chemicals products; good pricing power in key end user markets; stable through-the-cycle margins; vertical integration of production streams along the acetyl, polyester, olefin, and amine value chains; access to low-cost feedstocks in North America; moderate improvement in credit metrics; as well as our expectations that the company will continue to de-lever its post-acquisition balance sheet. The recommendation also reflects Eastman's multiple options for preserving liquidity in a stress scenario.
Offsetting considerations include continued weakness in the Fibers segment due to aggressive competitor pricing; somewhat slower than expected top line and operating income growth following the Taminco and Commonwealth Laminate acquisitions; and exposure to volatile feedstock costs, which lead to periodic lags between the pricing of feedstocks and derivative products. More sizable M&A is also a risk, although the company has indicated it is more interested in bolt-on than transformative deals.
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