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Volumes in specialty chemicals up by 14% at OMNOVA

02
Apr '08
OMNOVA Solutions Inc reported a net loss of $3.0 million, or $0.07 per diluted share, for the first quarter ended February 29, 2008, compared to a net loss of $5.1 million, or $0.12 per diluted share, for the first quarter of 2007. Due to seasonality, the first quarter of the Company's fiscal year is traditionally the weakest.

Net sales increased $25.8 million, to $190.6 million, for the first quarter of 2008 as compared to $164.8 million during the same period a year ago. Contributing to the sales increase in the first quarter of 2008 were improved unit volumes of $13.9 million, sales of $8.1 million representing one month of the Decorative Products Asian operations, favorable pricing of $2.9 million and positive foreign exchange translation of $0.9 million. Excluding the Decorative Products Asian operations, the Company's sales grew $17.7 million or 10.7%.

Effective December 31, 2007, the Company acquired the remaining 49.9% interest of its Decorative Products joint venture companies in China and Thailand for $28 million in cash. Previously, the Company used the equity method of accounting to record its proportionate share of the net income or loss of these Asian operations.

The operating results of the Decorative Products Asian operations are recognized on a one-month lag. Accordingly, for the quarter, the Company recorded two months using the equity method of accounting and one month on a fully-consolidated basis.

Gross profit increased 1.3% to $30.5 million, with a gross profit margin of 16.0%, in the first quarter of 2008 as compared to $30.1 million, with a gross profit margin of 18.3%, in the first quarter of 2007. Cost of goods sold for the first quarter of 2008 increased $25.4 million, to $160.1 million, versus the same quarter last year due primarily to higher volumes of $15.2 million, manufacturing costs of $7.4 million from the Decorative Products Asian operations and higher raw material costs of $5.9 million, partially offset by reduced manufacturing expense of $3.1 million, primarily in North America.


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