PGI nonwovens business performance strong in Q2
Polymer Group Inc reported results from operations for the second quarter and six-month periods ended June 28, 2008.
Net sales for the second quarter of 2008 were $290.9 million, up $19.9 million or 7.3% compared to $271.0 million in the second quarter of 2007. Sales increased primarily as a result of steps the company has continued to take to mitigate the impact of rising raw material costs through higher selling prices.
Price increases and mix improvements contributed $19.5 million to higher sales compared to the second quarter of 2007. Total sales volumes on a comparable basis were down 3.4% compared to the second quarter of 2007, primarily due to lower volumes from exited facilities in the U.S. and Europe in the second half of 2007.
Underlying volumes in the U.S. were solid as new industrial programs continued to come on line and hygiene demand remained strong.
Additionally, volumes were higher in Latin America as the new line in Argentina ramped up during the quarter, and in Asia as the company's new facility in Suzhou continued to improve compared to the prior year, along with higher hygiene volumes from the specialty chemical bond line at its Foshan, China location.
Changes in foreign currency exchange rates contributed $9.6 million to sales growth during the quarter compared to the same quarter of the prior year.
Gross profit increased to $45.9 million for the second quarter, an increase of $3.0 million or 6.9% over the first quarter of 2008 and 3.6% over the prior year comparable period.
Raw material costs, specifically, polypropylene, increased significantly during the quarter. These cost increases were greater than the increase in selling prices that the company was able to achieve during the same period. As such, profit levels were negatively impacted.
The improvement in gross profit was driven primarily by improvements in product mix and lower manufacturing costs in the Nonwovens segment, offset by higher raw material costs in excess of selling price increases, start-up costs associated with capacity installations and lower volumes from consolidated operations. Additionally, depreciation expense was lower in the second quarter of 2008 compared to the second quarter of 2007.
Operating income for the second quarter of 2008 was $14.4 million compared to $12.9 million in the second quarter of 2007 and $12.1 million in the first quarter of 2008. Included in operating income were special charges of $1.4 million in the second quarter of 2008 primarily associated with European consolidation activities.
Special charges amounted to $3.5 million in the second quarter of 2007 and $1.4 million in the first quarter of 2008.
Selling, general and administrative (SG&A) expenses were higher compared to the second quarter of 2007 primarily as the result of foreign currency exchange rates and separation costs associated with certain management positions, including the company's former chief financial officer.
Non-cash stock compensation expense represented $0.4 million in the most recent quarter, $1.8 million in the first quarter of 2008 and $0.9 million in the second quarter of 2007.
Polymer Group reported net income for the second quarter of $2.4 million compared to $1.2 million in the second quarter of 2007.
For the six months ended June 28, 2008, sales were $564.6 million, up $26.6 million, or 4.9%, from the same period in 2007.
Increases in selling prices attained to mitigate the impact of raw material cost increases was the largest contributor, accompanied by higher volumes in Latin America and Asia and favorable foreign currency translations.