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OMNOVA faces stiff headwinds in Q2 with record high raw costs
29 Jun '11
5 min read
Performance Chemicals - Net sales during the second quarter of 2011 increased $106.9 million, to $245.5 million, compared to $138.6 million in the second quarter of 2010. The ELIOKEM acquisition added $94.8 million of sales versus the prior year. Performance Chemicals' legacy business sales improvement of $12.1 million in the second quarter of 2011 was due to pricing increases of $17.8 million and $0.6 million of foreign currency translation effects partially offset by volume decreases of $6.3 million. Segment Operating Profit was $23.9 million for the second quarter of 2011 as compared to $26.7 million in the second quarter of 2010, a decrease of $2.8 million.
Performance Chemicals Adjusted Segment Operating Profit for the second quarter of 2011 was $24.2 million, excluding $0.3 million of restructuring and severance, compared to the second quarter pro forma 2010 amount of $29.7 million. The adjusted operating profit margin was 9.9% for the second quarter of 2011, compared to the pro forma adjusted operating profit margin of 13.9% in the second quarter of 2010. The adjusted operating profit margin declined due to higher raw material costs; the effect of the index pricing in which higher raw material costs are passed to customers, subject to a contractual time lag, with no gross margin benefit; plant start-up costs, and changes in product mix.
Decorative Products – Net sales were $84.4 million during the second quarter of 2011, a decrease of $3.4 million, or 3.9%, compared to the second quarter of 2010. Sales as compared to last year improved in global wallcovering and decorative laminates but declined in global coated fabrics and performance films. In total, volume declines, primarily related to the China coated fabric and domestic performance film product lines, were $10.5 million in the quarter. These were partially offset by price increases of approximately $4.7 million and favorable foreign exchange impact of $2.4 million.
Adjusted Segment Operating results were breakeven in the second quarter of 2011, compared to Pro Forma Adjusted Segment Operating Profit of $2.4 million for the second quarter of 2010. However, this is an improvement from the Adjusted Segment Operating Loss of $1.7 million in the first quarter of 2011. The major contributors to the year-over-year operating profit decline were the reduction in sales volumes and increased raw material costs. Higher raw material costs of approximately $5.6 million were partially offset by price increases of $4.7 million, or an 84% recovery. Price recovery continued to improve throughout the quarter.
OMNOVA Solutions Inc. is a technology-based company with pro forma sales for the twelve months ending May 31, 2011 of $1.2 billion and an active global workforce of approximately 2,800. OMNOVA is an innovator of emulsion polymers, specialty chemicals, and decorative and functional surfaces for a variety of commercial, industrial and residential end uses.
Performance Chemicals Adjusted Segment Operating Profit for the second quarter of 2011 was $24.2 million, excluding $0.3 million of restructuring and severance, compared to the second quarter pro forma 2010 amount of $29.7 million. The adjusted operating profit margin was 9.9% for the second quarter of 2011, compared to the pro forma adjusted operating profit margin of 13.9% in the second quarter of 2010. The adjusted operating profit margin declined due to higher raw material costs; the effect of the index pricing in which higher raw material costs are passed to customers, subject to a contractual time lag, with no gross margin benefit; plant start-up costs, and changes in product mix.
Decorative Products – Net sales were $84.4 million during the second quarter of 2011, a decrease of $3.4 million, or 3.9%, compared to the second quarter of 2010. Sales as compared to last year improved in global wallcovering and decorative laminates but declined in global coated fabrics and performance films. In total, volume declines, primarily related to the China coated fabric and domestic performance film product lines, were $10.5 million in the quarter. These were partially offset by price increases of approximately $4.7 million and favorable foreign exchange impact of $2.4 million.
Adjusted Segment Operating results were breakeven in the second quarter of 2011, compared to Pro Forma Adjusted Segment Operating Profit of $2.4 million for the second quarter of 2010. However, this is an improvement from the Adjusted Segment Operating Loss of $1.7 million in the first quarter of 2011. The major contributors to the year-over-year operating profit decline were the reduction in sales volumes and increased raw material costs. Higher raw material costs of approximately $5.6 million were partially offset by price increases of $4.7 million, or an 84% recovery. Price recovery continued to improve throughout the quarter.
OMNOVA Solutions Inc. is a technology-based company with pro forma sales for the twelve months ending May 31, 2011 of $1.2 billion and an active global workforce of approximately 2,800. OMNOVA is an innovator of emulsion polymers, specialty chemicals, and decorative and functional surfaces for a variety of commercial, industrial and residential end uses.
OMNOVA Solutions Inc
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