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Favorable impact of cost reduction programs on Cytec earnings

17 Jul '09
5 min read

In Additive Technologies, overall selling volumes were down by 27% versus the second quarter 2008, attributed mainly to weak demand in industrial markets and partly due to the exit of certain low-value product lines. Selling prices increased by 1% and the impact of exchange rates decreased sales by 4%.

Operating earnings of $3.1 million were down compared to the $6.9 million in the second quarter of 2008 mainly as a result of lower selling volumes and production rates.

Cytec In Process Separation sales decreased 23% to $58 million; operating earnings decreased to $2.1 million.
In Process Separation selling volumes were down 24% versus the second quarter 2008, primarily a result of customer destocking and lower demand in both the mining and phosphine markets. Selling prices increased by 3% and the impact of exchange rates decreased sales by 2%.

Operating earnings of $2.1 million were down compared to $10.9 million in the prior year quarter, mainly as a result of lower selling volumes and production rates.

Cytec Engineered Materials sales decreased by 21% to $178 million; operating earnings decreased to $22.1 million.
In Cytec Engineered Materials, selling volumes decreased by 22%, driven primarily by lower sales as a result of destocking by our customers who supply the large commercial transport sector, build rate reductions in business jets, and reduced sales in high performance industrial markets. Selling prices increased by 3% and the impact of exchange rates reduced sales by 2%.

Operating earnings of $22.1 million were down versus $44.8 million in the second quarter of 2008, mainly as a result of lower selling volumes and production rates.

Cytec Building Block Chemicals sales decreased by 34% to $91 million; operating earnings decreased to $1.9 million.
In Building Block Chemicals, selling prices decreased by 64% as a result of significantly lower propylene costs versus the second quarter 2008, driving down pricing for Acrylonitrile. The significant selling price reduction was partially offset by a 30% increase in selling volumes due to a major acrylonitrile outage in the prior year.

Operating earnings of $1.9 million were down compared to the $6.5 million in the prior year second quarter. The reduced earnings resulted primarily from lower selling prices driven by reductions in raw material costs.

Special Items
In the second quarter of 2009 a number of special items were recorded that resulted in a pre-tax charge of $35.6 million ($24.2 million after-tax or $0.51 per share) as follows:

• Included in manufacturing cost of sales and operating expenses is a pre-tax charge of $34.2 million ($22.8 million after-tax or $0.48 per diluted share) associated with various restructuring initiatives across Specialty Chemicals, Engineered Materials, and Corporate operations.
• Included in Corporate and Unallocated is a pre-tax loss of $1.4 million ($1.4 million after-tax or $0.03 per diluted share) related to the exit of the polyurethane product line in Asia. This completes the sale of this minor product line (as the sale of the European operations was completed in the first quarter of 2009).

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Cytec Industries Inc

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