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Solutia repots solid second quarter growth
29
Jul '08
Solutia Inc reported net sales of $1,095 million for the second quarter of 2008, a 20% increase over net sales of $911 million for the same period in 2007. Approximately 8% of this increase is attributable to the consolidation of Flexsys sales beginning on May 1, 2007, following Solutia's acquisition of the remaining 50% share of its former joint venture. On a pro forma basis, adjusting 2007 second quarter sales to include Flexsys, sales increased 14% over the prior year.

Solutia had a consolidated loss of $16 million for the second quarter 2008 compared to income from continuing operations of $27 million for the same period in 2007. Solutia's results were impacted by certain events affecting comparability totaling an after-tax loss of $33 million in 2008 and an after-tax gain of $10 million in 2007.

After consideration of these special items in both periods, income held steady at $17 million in the second quarter of 2008 or $.28 per share, despite increased depreciation and amortization expense, higher interest cost and higher stock compensation expense.

"We are pleased to report solid second quarter growth, driven by strong volumes and price increases across our businesses," said Jeffry N. Quinn, chairman, president and chief executive officer of Solutia Inc. "Importantly, even though the escalation of raw materials accelerated in the second quarter compared to the first, our focused pricing actions and strong market positions allowed us to recover a significant percentage of this cost increase. We also continued to benefit from our geographically diverse business, as international growth -- particularly in China -- more than offset softening domestic markets."

Quinn added, "In addition to producing strong results during the second quarter, we announced two important strategic developments which will have the potential to further enhance our transformation to a high-margin pure play specialty chemical company. We retained HSBC to review strategic alternatives for the Nylon business, and laid the foundation for a key longer-term growth opportunity by establishing our Saflex Photovoltaic business."

Reported consolidated EBITDA for the second quarter decreased to $67 million from $110 million in 2007. After taking into consideration events affecting comparability and non-cash stock compensation expense (as detailed below in the summary of events affecting comparability) of net charges totaling $51 million and net gains totaling $26 million for 2008 and 2007, respectively, Adjusted EBITDA increased to $118 million from $84 million. On a pro forma basis, including Flexsys results for April 2007 on a 100% basis, Adjusted EBITDA in the second quarter 2008 increased $25 million from $93 million over the prior year.

The most significant adjustment in the current quarter was a negative margin impact from the selling of inventory that was fair valued at the time of emergence as required by fresh start accounting. This impact was a non-cash charge of $49 million.

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