DOW JONES NEWSWIRES 
 

Eastman Chemical Co.'s (EMN) second-quarter profit dropped 44% on lower sales, but the company signaled Thursday that demand was continuing its slow recovery.

Shares jumped 6.4% to $48.09 in after-hours trading as the chemical company's earnings topped its guidance and Wall Street's expectations though revenue fell short of analysts' estimate. The stock has more than doubled from its all-time low in March but is still down more than a third from a year ago.

Eastman also predicted third-quarter earnings far above Wall Street's view.

Chief Executive Jim Rogers, who assumed the post in May, attributed the better-than-expected results to cost cutting and "some improvement in demand" after a bout of customers' trimming inventories.

He said demand is expected to remain near current levels in the second half of the year while raw material and energy costs rise slightly.

Eastman, which has cut jobs and other costs to match demand, said in April that demand was beginning a modest recovery after a rapid deterioration as big industrial customers cut production.

The maker of chemicals, synthetic fibers and plastics reported profit of $65 million, or 89 cents a share, down from $115 million, or $1.48 a share, a year earlier. Excluding restructuring charges and asset impairments, earnings fell to 86 cents a share from $1.53.

Revenue dropped 32% to $1.25 billion.

In April, the company predicted earnings of about 71 cents a share. Analysts' latest estimates were for per-share earnings of 71 cents on revenue of $1.35 billion, according to a poll by Thomson Reuters.

Gross margin rose to 20.8% from 17.5%.

Sales in the performance chemicals and intermediates segment, Eastman's largest unit, fell 51%, while the coatings, adhesives, specialty polymers and inks segment's sales dropped 27%.

Looking ahead, Eastman expects third-quarter earnings of $1.10 a share. Analysts estimated earnings of 82 cents.

The company also now expects 2009 earnings to be toward the high end of its April forecast of $2 to $3 a share.

-By Kathy Shwiff, Dow Jones Newswires; 212-416-2357; Kathy.Shwiff@dowjones.com