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Tickers in this Article: DD, DOW, EMN
Eastman Chemical Company (EMN) announced that it has collaborated with Sinopec Yangzi Petrochemical Company Limited to build a hydrogenated hydrocarbon resin plant in Nanjing, China. Both the companies will hold equal share in the joint venture.

The facility is expected to be operational by the end of 2014 and will expand Eastman's total capacity for hydrogenated resins by 50%. Once the plant becomes operational, it is expected to produce 50,000 metric tons of Eastman's Adhesives and Plasticizers segment's Regalite hydrocarbon resins.

Regalite is useful in making packaging and personal hygiene products, including disposable diapers. The product is quite versatile and can be used with a variety of polymers.

Eastman Chemical and Sinopec already have a joint venture for manufacturing Eastman Eastotac resins in Nanjing. The existing facility will be expanded for the new venture.

In July 2012, Eastman Chemical also took over Missouri-based chemical company Solutia under a cash and stock deal worth roughly $4.8 billion (including Solutia debt). The acquisition is expected to significantly accelerate the company's growth and offer lucrative opportunities in Asia-Pacific.

Hefty costs associated with the takeover dragged down Eastman's profit in the second quarter of 2012. The company reported earnings (from continuing operation) of $1.26 per share in the quarter, down 17% from $1.51 posted a year ago. Excluding costs related to the acquisition of Solutia Inc. and a one-time gain, the Tennessee-based chemicals maker earned $1.40 a share, which outperformed the Zacks Consensus Estimate of $1.34. Profit (as reported) from continuing operations dropped 19% to $177 million.

Eastman Chemical continues to expect double-digit earnings growth in 2012 due to the acquisition of Solutia. The company retained its adjusted earnings forecast of $5.30 a share for the year, which is higher than the current Zacks Consensus Estimate of $5.20.

We believe that Eastman Chemical is well positioned to benefit from the synergies of its Solutia acquisition in second-half 2012. The company also stands to benefit from business restructuring, cost-cutting measures and increased capacity additions.

The company, which competes with The Dow Chemical Company (DOW) and E. I. du Pont de Nemours and Company (DD), holds a short-term Zacks #2 Rank, which translates into a short-term (1 to 3 months) Buy rating. We currently have an Outperform recommendation on the shares of Eastman Chemicals.

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