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Favorable impact of cost reduction programs on Cytec earnings

17
Jul '09
Cytec Industries Inc announced a net loss for the second quarter 2009 of $24.8 million or $0.52 per share on net sales of $685 million. Included in the quarter are several special items that total $24.2 million of expense after-tax or $0.51 per share and are outlined further in this release. Excluding these special items, net loss was $0.6 million or $0.01 per diluted share.

Net earnings for the second quarter of 2008 were $56.5 million or $1.16 per diluted share on net sales of $1,006 million. Included in the 2008 quarter were several special items that totaled $2.0 million of net expense after-tax or $0.04 per diluted share. Excluding these special items, net earnings were $58.5 million or $1.20 per diluted share.

Shane Fleming, Chairman, President and Chief Executive Officer commented, “Sales declined across all specialty chemicals segments in the second quarter compared with the prior year due to the weak economy compounded by customer destocking activity. However, we are encouraged by our specialty chemicals sales growth of 18% from the first quarter 2009 and month-to month improvement during the second quarter, which supports our view that our customers have completed the bulk of their destocking initiatives. Engineered Materials was also impacted by the destocking actions that are ongoing within the large commercial transport sector, as well as significantly reduced build rates in the business jet and industrial sectors.

“We are making great progress in implementing our structural cost reduction programs, and these actions will have a greater favorable impact on our earnings in the second half of this year. Our actions to improve our cash flow and liquidity position also continue to move forward, with progress on cash flow generation and debt reduction exceeding our expectations. Our earnings and margins were adversely affected as we operated almost all of our plants at reduced rates due to weak demand and our own aggressive destocking actions.”

Cytec Coating Resins sales decreased 38% to $295 million; operating loss of $19.2 million.
In Coating Resins, overall selling volumes were down by 30% versus the second quarter 2008, with continued weak demand in the industrial coatings markets impacting the segment. Selling prices decreased by 3% and the impact of exchange rates decreased sales by 5%.

Operating loss of $19.2 million was down versus earnings of $21.9 million in the second quarter of 2008 principally due to the weak global economic conditions impacting volumes across all product lines in this segment. Sales in the second quarter 2009, however, are approximately 20% above the first quarter 2009 with improvements in each product line. Also adversely impacting earnings in the quarter was the impact of decreased production rates to reduce finished goods inventory.


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