OMNOVA's carpet chemicals biz decline

17 Jun '08

3 min read

Cost of goods sold of $185.9 million for the second quarter of 2008 increased $35.0 million as compared to the second quarter of 2007, due to manufacturing costs of $25.7 million from the inclusion of the Decorative Products Asian businesses, and $14.4 million of higher raw material costs. Cost of goods sold was partially reduced by lower volumes of $2.9 million and lower manufacturing expense of $2.2 million, primarily in North America.

"Our priority to improve profitability continued to be challenged by record setting raw material inflation during the quarter," said Kevin McMullen, OMNOVA Solutions' Chairman and Chief Executive Officer. "Late in the second quarter, we implemented price increases at both Decorative Products and Performance Chemicals with minimal loss of volume.

However, as oil has continued to climb as high as $139 a barrel, we have experienced new record high costs for OMNOVA's major raw materials during our third quarter starting in June. In response, we have announced additional price increases of up to 30% across many of our Performance Chemicals products."

"In addition to new pricing actions, we are also focused on productivity improvements to restore profit margins to acceptable levels. We continue to drive our LEAN SixSigma focus deeper into our domestic plants while introducing the concept to our new Asian businesses. Our cost structure, excluding raw materials, is lower than anytime since our formation in 1999. Everyone in our organization is keenly focused on our most important priority, which is margin improvement," McMullen said.

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