Cytec announces several initiatives to improve cash flow
Cytec Industries Inc announced a reduction to its adjusted earnings per share forecast for the full year 2008, a non-cash goodwill impairment charge to be included in fourth quarter 2008 reported earnings and a series of restructuring actions.
Shane Fleming, Chairman, President and Chief Executive Officer commented, “The unprecedented downturn in the global economy over the last several months has led to a dramatic reduction in demand for our products across many of our industrial markets leading to reduced earnings in the fourth quarter. We do not expect to see a short term turnaround in the economy and, as a result, we are taking proactive measures to reduce costs, improve cash management and better position Cytec to focus on its growth platforms.”
The company now anticipates full year 2008 earnings per share, after adjusting for special items, to be a range of $3.45 to $3.50 per share, down from the prior estimate of $3.75 to $3.85 per share.
The Company is also in the process of conducting its annual impairment test for goodwill. The adverse impact of the current macroeconomic business environment on the long-term financial outlook for the Surface Specialties segment has led the Company to conclude an impairment has occurred related to the carrying value of the segment's goodwill. While still preliminary, the Company expects a pre-tax noncash special item charge up to approximately $500 million will be included in 2008's fourth quarter results to reduce the carrying value of goodwill related to the Surface Specialties segment.
Mr. Fleming explained, “It is our view that the current economic environment will extend at least throughout 2009 and we must therefore take immediate actions to align our cost structure to the changing and challenging demand environment.”
Cytec's restructuring initiatives are intended to build on its market and technology position in engineered materials, eco-friendly coating resins and mining and phosphine chemistry while navigating through the challenging conditions in its markets globally. Cytec expects that these initiatives should lead to a reduction of approximately 600 employee positions, approximately 10% of Cytec's headcount, mostly in the Specialty Chemicals product lines. While still not finalized, Cytec anticipates these initiatives should result in an estimated net pre-tax restructuring special item charge up to $140 million over the next several quarters which includes an estimated non-cash charge of around $50 million for the write-off of assets. Also included in this is an estimated $4 million restructuring charge in the fourth quarter of 2008. These actions are targeted to achieve $85 million in annualized cost savings by the end of 2009.
Cytec has ongoing initiatives to reduce costs and improve efficiencies in all aspects of its operations, including consolidation of manufacturing facilities, reduction in excess manufacturing capacity, migration to regional shared services and simplifying and streamlining its business processes and organization. As part of these initiatives, Cytec anticipates, subject to consultation and negotiation with our Works Councils, that its site in La Llagosta, Spain will be closed and that production of certain low margin product lines at its sites in Drogenbos, Belgium and Hamburg, Germany will be significantly reduced or shut down.