Home / Knowledge / News / Textiles / OMNOVA faces stiff headwinds in Q2 with record high raw costs
OMNOVA faces stiff headwinds in Q2 with record high raw costs
29
Jun '11
OMNOVA Solutions Inc announced Net Income of $6.2 million, or $0.14 Diluted Earnings per share, for the second quarter ended May 31, 2011. This compares to Net Income of $15.1 million, or Diluted Earnings Per Share of $0.33 for the second quarter of 2010. In the second quarter of 2011, there were a number of non-recurring charges totaling $1.1 million resulting primarily from the acquisition of specialty chemicals producer ELIOKEM.

Excluding these items, Adjusted Net Income for the second quarter of 2011 was $7.3 million, with Adjusted Diluted Earnings Per Share of $0.16, as compared to the Adjusted Pro Forma Net Income of $12.8 million or $0.29 per diluted share for the second quarter of 2010. The Adjusted Net Income for the second quarter of 2011 also includes, net of tax, unrecovered raw material costs of $2.4 million, lower margin on weaker volumes of $ 2.2 million, foreign exchange currency losses of $1.8 million and new plant start-up costs of $ 0.3 million. The Diluted Earnings Per Share impact of these items was approximately $(0.14).

"The Company faced stiff headwinds in the second quarter with record high raw material costs, weaker demand in certain end-use markets and start-up costs for a new plant in China," said Kevin McMullen, OMNOVA Solutions' Chairman and Chief Executive Officer. "In the face of these market challenges, our second quarter results, while below our prior expectations, reflect the Company's improved, more robust and global business model. The integration of ELIOKEM has added numerous innovative products, expanded our penetration into new and adjacent markets and accelerated the globalization of our business."

Gross profit in the second quarter of 2011 increased to $65.1 million, compared to $47.2 million in the second quarter of 2010, primarily due to the ELIOKEM acquisition. Raw material costs in OMNOVA's legacy business increased $26.3 million in the second quarter versus the same period last year. Gross profit margins in the second quarter of 2011 were 19.7%, compared to margins of 20.8% in the second quarter of 2010. The decline in gross profit margin percentage was due primarily to the significant raw material inflation; the effect of Performance Chemicals index pricing in which higher raw material costs are passed to customers, subject to a contractual time lag, with no gross margin benefit; new plant start-up costs; and changes in product mix.

Selling, general and administrative expenses (SG&A) in the second quarter of 2011 increased to $34.3 million, or 10.4% of sales, compared to $25.6 million, or 11.3% of sales, in the second quarter of 2010. The increase of $8.7 million in SG&A was primarily due to the ELIOKEM acquisition. The decline as a percentage of sales was due to higher sales and the Company's focused ongoing efforts to control costs and to leverage SG&A across its global operations and growing revenue base.

As of May 31, 2011, the Company's debt of $457.2 million was comprised of $250.0 million of 7.875% Senior Notes maturing in 2017, a term loan of $197.2 million maturing in 2016 and $10.0 million of foreign borrowings. Cash and cash equivalents totaled $79.5 million. There were no outstanding borrowings under the Company's U.S. revolving asset-based credit facility and the available borrowing capacity was $94.9 million.

Must ReadView All

President Donald Trump; Courtesy: White House

Textiles | On 23rd Jan 2017

US textile industry eager to work with President Trump

The US textile industry is eager to work with President Donald Trump...

Textiles | On 23rd Jan 2017

LyondellBasel expands Texas plant ethylene capacity

US based producer of petrochemicals and speciality chemicals...

Textiles | On 23rd Jan 2017

China’s cotton imports down 39% in 2016

China’s total cotton imports declined by 39.1 per cent to ...tons in...

Interviews View All

Claudia Kersten
Global Organic Textile Standard

‘GOTS is a very efficient supply chain management tool, especially for...

Md Hanifur Rahman
Aman Group

The level of understanding the job role and organisational requirements...

Asim Dalal
Indo Count Retail Ventures

Today, there is no other emerging market as India, "we make in India and...

Mohammad Hassan
Biax Fiberfilm

About one in every 20 patients picks up an infection while hospitalised....

Paolo Ocleppo
Sandvik Hyperion

Paolo Ocleppo, Rotary Cutting Segment manager, Sandvik Hyperion discusses...

Marten Alkhagen
Swerea IVF AB

Marten Alkhagen, Senior Scientist - Nonwoven and Technical Textiles of...

Wendell Rodricks
Wendell Rodricks

"We should not compare India and the West. There are things we do that...

Rupa Sood and Sharan Apparao
Nayaab

Nayaab, an exhibition meant to celebrate Indian weaves, is in its second...

Tony Ward
Tony Ward

"You have to truly understand what your client wants, know her needs, what ...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH
January 2017

January 2017

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

SUBSCRIBE


Browse Our Archives

GO


eNEWS
Insights
Subscribe today and get the latest News update in your mail box.
Advanced Search