29July 2014 Chemicals / Specially Eastman Chemical 02 Results Eastman reported Q2 EPS of $1.92, up 7%, and $0.08 or 4% above consensus of $1.84. A lower than expected tax rate added $0.01. The upside was driven by stronger than expected results in Adhesives & Plasticizers and SFI. Sales rose 1% on flat volumes and price while FX added 1%. EBIT fell 3% to $441MM while margins compressed 70bps YoY (+130 O°O) to 17.9% amid higher propane costs. Eastman reaffirmed '14 EPS guidance of $6.70-$7.00, up 4-9% YoY (consensus: $6.93). Additives & Functional Products sales rose 5% on 4% higher volumes on improved coatings demand (building and construction, transportation). EBIT fell 2% to $103MM (cons: $104MM) while margins compressed 160 bps to 22.8% on higher propane prices. Adhesives & Plasticizers sales rose 6% on 9% higher volumes partially offset by 4% lower price. EBIT rose 12% to $56MM (cons: $45MM) as adhesive demand appears to have turned the corner following last year's sharp declines and a shift towards Eastman's non-phthalate plasticizers owing to substitution away from phthalate plasticizers. Margins expanded 90 bps to 15.6%. Advanced Materials sales rose 1% on flat volumes and price while FX added 1%. EBIT fell 1% to $80MM (cons: $87MM) as margins compressed 30 bps to 12.7% owing to the impact of the Kingsport outage. Fibers sales rose 6% on 4% higher price and 2% higher volume. EBIT climbed 6% to $123MM (cons: $126MM) while margins compressed 10 bps to 31.9%. Specialty Fluids & Intermediates sales fell 6% on 8% lower volume due to the Kingsport outage partially offset by 2% higher price. EBIT fell 19% to $96MM (cons: $81MM) and margins compressed 220 bps to 15.2% on higher propane costs and the effects from the Kingsport outage. 'Figure 3: O2 '14 segment sales % change (YoY) Volume Prim FX Total Additives & Functional 4% I% 5% Products Adhesives & Plasticizers 9% ‘416, 1% 6% Advanced Materials I% 1% Abers 2% 4% 6%