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Polymer group sales climb higher
May '08
Polymer Group Inc (PGI) announced results of operations for the first quarter ended March 29, 2008.

Net sales for the first quarter of 2008 were $273.8 million compared to $267.0 million in the first quarter of 2007 and $265.4 million in the previous quarter.

Sales growth was primarily driven by the impact of price increases implemented to address higher raw material costs during the period and favorable foreign currency translation rates as most currencies strengthened against the U.S. dollar.

Underlying Nonwovens volume increases from the company's new medical business in Suzhou, China, improved industrial sales in North American markets and higher volumes in the hygiene markets in Latin America were offset by the effect of businesses that the company strategically exited during 2007 in the U.S. and in Europe.

Sales from the Oriented Polymers segment were down slightly year-over-year due primarily to lower sales in Canada resulting from interruptions in supply of Nomex fibers used to make high value flame retardant materials.

Reductions in overhead costs, including lower depreciation costs as a result of special charges taken in the fourth quarter of 2007, resulted in an improvement in gross profit compared to the prior quarter.

Gross profit was $42.9 million for the first quarter of 2008, representing a gross profit margin of 15.7%, compared to a gross profit of $38.9 million, or a 14.6% margin, for the previous quarter and $46.0 million, or a 17.2% margin, for the same period in 2007.

During the quarter, the effect of higher raw material costs experienced late in the fourth quarter continued to negatively impact profitability. Raw material costs represented 55.9% of sales in the first quarter compared to 53.2% in the first quarter of 2007.

The company's customer agreements, representing approximately 35% - 40% of total volume, generally provide for price adjustments on a quarterly basis based on the average index price in the previous quarter.

This lag can result in an impact to earnings during periods of significant increases on raw materials. Initiatives to shorten this lag time to mitigate the impact are being pursued during the year.

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