Eastman Chemical : Q4 2020 Financial Results Prepared Remarks

Eastman Q4 & FY 2020 Financial Results Prepared Remarks

January 28, 2021

Greg Riddle-VP, Investor Relations & Corporate Affairs:

Slides 1 and 2:

This document is the CEO's and CFO's prepared remarks for Eastman Chemical Company's fourth-quarter and full-year 2020 financial results. This is to be read with the fourth- quarter and full-year financial results news release and the slides detailing our fourth-quarter and full-year financial results, both of which were publicly issued and posted on our website (investors.eastman.com) after the close of NYSE trading on January 28, 2021. On January 29, 2021, at 8:00 a.m. ET, Mark Costa, Board Chair and CEO, and Willie McLain, Senior Vice President and CFO, will host a public question-and-answer session with industry analysts that anyone can listen to on our website or by telephone as detailed in our financial results news release. This document, the accompanying slides, and the call/webcast that follows include certain forward-looking statements concerning our plans and expectations. Certain risks and uncertainties that may cause actual results to be different than our plans and expectations are or will be detailed in the company's fourth-quarter and full-year 2020 financial results news release, in the remarks in this document, and in the accompanying slides, and during the call, and in our filings with the Securities and Exchange Commission, including the Form 10-Q filed for third-quarter 2020 and the Form 10-K to be filed for full-year 2020. All earnings referenced in this presentation, the accompanying slides, and the call/webcast exclude certain noncore and unusual items. Reconciliations to the most directly comparable GAAP financial measures and other associated disclosures, including a description of the excluded and adjusted items, are available in the fourth-quarter and full-year 2020 financial results news release.

Eastman Q3 2020 Financial Results Prepared Remarks

Mark Costa-Board Chair & CEO:

Slide 3 -2020 highlights

2020 was an incredibly challenging year across many fronts at Eastman, and we persevered with resilient results. We continue to lead from a position of strength with our innovation-driven growth model, which is the heart of how we win. I want to first and foremost thank the women and men of Eastman who helped us succeed. Each of you showed up to work every day and gave it your best - whether in one of our manufacturing facilities across the

globe, in labs, in our office buildings, or in your home office. Your contribution to Eastman was

significant, and I'm grateful to you. I know with certainty that in our 2020 centennial year, despite all the unprecedented challenges, we delivered on our promise to enhance the quality of life in a material way.

We have many highlights to celebrate. Most importantly, we took quick and decisive action in the first quarter to adjust our operations to keep employees safe and preserve our operational integrity. We also shifted our financial focus to prioritizing cash and liquidity, given the uncertainties we faced-and we delivered another year of outstanding free cash flow: our

fourth consecutive year of free cash flow greater than $1 billion.

While we prioritized cash, our earnings performance was resilient, which is a testament to the tremendous investments we've made across our innovation portfolio over the last decade, including enhancing our market development and commercial capabilities. We aggressively reduced our costs by $150 million through both structural and short-term actions. And we accelerated our operational transformation program to keep costs flat in 2021. Additionally, we demonstrated that we have a robust portfolio of businesses and end markets, which gives us stability.

I also am excited that we've accelerated progress on our circular economy initiatives- and it's paying off with several wins across our portfolio, and awards recognizing Eastman as a leader in sustainability, including being named as a Wall Street Journal Most Sustainably Managed Company of 2020. In addition, we committed to ambitious and exciting new goals in our 2020 sustainability report. We announced that we will reduce our scope 1 & 2 greenhouse gas emissions by one-third by 2030 and achieve carbon-neutrality by 2050. After the outlook

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Eastman Q3 2020 Financial Results Prepared Remarks

discussion, we will discuss in more depth how we intend to invest in being a leader in the circular economy.

All of these highlights demonstrate the positive momentum we are building.. This is an exciting time at Eastman. Our strengths have never been clearer than during the pandemic, and we are well positioned to start the next 100 years of Eastman.

Willie McLain-Senior Vice President and CFO:

Slide 4 - 4Q & FY 2020 financial results - Corporate

Fourth-quarter results were better than our original outlook in October as demand continued to gain momentum from weakness during the Spring and Summer. Transportation saw the biggest pickup relative to our expectations, though aviation remains under pressure. Other end markets such as durables and personal care continued to have strong demand in the fourth quarter. Throughout the year, we created our own growth above the pace of market recovery, using our innovation-driven growth model. Revenue was down one percent with slightly higher volumes and favorable currency more than offset by lower pricing. The decline in

price was due to a combination of lower raw material and energy prices across the company

and competitive pressure in a few products in Additives & Functional Products and Chemical Intermediates.

Adjusted EBIT was up 18 percent compared to 4Q19 and this strong leverage to the bottom line was fueled by a combination of the improvement in volume / mix, better capacity utilization, and continued cost savings, somewhat offset by spread compression. Adjusted EPS was a record at $1.69, higher than any fourth quarter in the company's history. Adjusted EBIT margin was up 240 basis points.

Full-year 2020 revenue was down 9 percent due to 5 percent lower volume / mix

and 4 percent lower pricing. This topline performance was resilient and reflects the value of our diverse end markets and robust portfolio of innovative products across the company. The slowdown in the global economy impacted all segments, particularly product lines used in transportation, building and construction, and textiles end markets. Adjusted EBIT decreased 12 percent. The quick actions we took to adjust operations and prioritize cash had a significant

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Eastman Q3 2020 Financial Results Prepared Remarks

impact on earnings, including a $200 million headwind associated with lower capacity utilization as a result of both lower demand and our intentional reduction of inventory levels beyond simply adjusting to lower demand. The cost impact of this additional inventory reduction in 2020 was approximately half of this headwind, or about $100 million. Adjusted EPS was $6.15, down 14 percent. Cost savings, which totaled approximately $150 million in 2020, partially offset the impacts of lower volume / mix and lower capacity utilization. These results in this unique year, alongside our strong free cash flow, are an excellent indication of the strong performance-oriented culture we have at Eastman.

Slide 5 - 4Q & FY 2020 financial results - Advanced Materials

Advanced Materials delivered record earnings in the fourth quarter-an impressive result considering 4Q19 was the previous record. EBIT was sequentially stable with the third quarter as demand continued to accelerate, which offset any normal seasonality.

All businesses delivered revenue growth in the fourth quarter, led by performance films, which had mid-teens revenue growth. Specialty plastics had record revenue and earnings, continuing what has been an impressive year despite the pandemic. Revenue was up 6 percent primarily due to higher volume / mix. Lower pricing, which was mostly due to lower paraxylene prices in specialty plastics, was offset by a favorable currency impact of 2 percent. The strong demand in the quarter was in transportation, consumer durables, architecture, and electronics end markets. The strength of the performance of our premium products continues to highlight the power of our innovation-driven growth model. For example, our performance films business in China dramatically outperformed the underlying auto market through significant share gains that were the driven by the combination of superior multi-generation product development pipeline and differentiated service offering. In Tritan™, our established position with leading brands, coupled with the launch of our Tritan™ Renew circular plastics offering, has dramatically expanded our markets and penetration of key categories.

Typically, the Advanced Materials business sees some seasonal decline in the fourth quarter, but this year was different due to a couple factors. First, end markets are still recovering back to normal primary demand levels, so there was positive momentum. In

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