COLUMBUS, OH - Hexion Inc. announced results for the third quarter that ended Sept. 30, 2017. The company reported net sales of $914 million, a 12% increase versus the prior year, and a new $40 million cost reduction program.
“Hexion posted strong topline sales growth of 12% and volume gains of 9%, respectively, in the third quarter of 2017,” said Craig A. Rogerson, Chairman, President and CEO. “Our Segment EBITDA reflected continued year-over-year gains in our base epoxy resins, North American forest products resins, and global formaldehyde businesses, offset by challenges associated with the hurricanes and continued weakness in global wind energy demand. We saw sequential profitability growth in our specialty epoxy resins business driven by strong growth in our waterborne coatings business and stable wind energy volumes. In addition, we continue to position the company for profitable growth by strategically optimizing our cost structure and investing in our specialty portfolio.”
Rogerson added, “We were pleased to complete our Edmonton research and development facility expansion, which is focused on developing next-generation forest product resins as we continue to strategically invest in our technology infrastructure. Finally, we expect to deliver year-over-year EBITDA growth and generate solid levels of free cash flow in the fourth quarter.”
Net sales for the quarter that ended Sept. 30, 2017 were $914 million, an increase of 12% compared with $819 million in the prior-year period. The increase in reported net sales was primarily driven by the pass-through of higher raw material costs and volume gains in oilfield proppants, base epoxy resins, and North American forest product resins and formaldehyde businesses.
Segment EBITDA for the quarter was $96 million, a decrease of 14% compared with the prior-year period. Adjusted for the $6 million negative impact of hurricanes, Segment EBITDA totaled $102 million, or a decrease of 9% compared to the prior year. Third quarter 2017 results were driven by growth in the company’s North American forest product resins and formaldehyde businesses, as well as improvements in base epoxy resins and oilfield proppants, which was offset by a year-over-year decline in the specialty epoxy resins business driven by destocking and competitive pressures in Hexion’s global wind energy business. In addition, the company benefited from insurance proceeds in the prior-year period related to its Versatic™ Acids and Derivatives business that did not reoccur in the third quarter of 2017.
In the first nine months of 2017, the company achieved approximately $20 million of total in-process cost savings. As part of its ongoing commitment to optimize its cost structure and further streamline the organization, Hexion has identified approximately $40 million in additional structural cost savings. The company remains committed to redeploying portions of its cost savings into strategic growth initiatives, such as its recently completed Edmonton research and development expansion and additional waterborne coatings capacity. With the addition of the new cost savings program, Hexion had $54 million of total in-process cost savings, which it expects to be achieved over the next 12 to 18 months.