Hexion Announces Fourth Quarter and Fiscal Year 2017 Results
COLUMBUS, OH - Hexion Inc. announced results for the fourth quarter and fiscal year ended Dec. 31, 2017, reporting net sales growth for the fourth quarter.
“Hexion posted solid Segment EBITDA gains, sales growth of 18% and volume increases of approximately 10%, respectively, in the fourth quarter of 2017,” said Craig A. Rogerson, Chairman, President and CEO. “Our fourth quarter segment EBITDA reflected continued strong demand and year-over-year gains in our base epoxy resins, North American forest products resins, and global formaldehyde businesses.”
Rogerson added, “Looking ahead, our outlook is positive for the key end markets we serve. We also expect to further realize the structural cost savings from our recently announced restructuring initiatives, which will support 2018 Segment EBITDA growth. These savings, along with continued growth across most product lines, are expected to drive improved Segment EBITDA in 2018 versus the prior year.”
Fourth Quarter 2017 Results
Net sales for the quarter ended Dec. 31, 2017, were $895 million, an increase of 18% compared with $758 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 broad-based volume gains throughout the entire portfolio with significant gains in base epoxy resins, Versatic™ Acids and Derivatives, the company’s global forest product resins and formaldehyde, and oilfield proppants businesses.
Segment EBITDA for the quarter ended Dec. 31, 2017, was $74 million, an increase of 7% compared with the prior-year period. Fourth quarter 2017 results were driven by growth in base epoxy resins, North America and Latin America forest product resins and global formaldehyde businesses, and phenolic specialty resins. Excluding $4 million of insurance proceeds in the prior year period related to the Versatic Acids and Derivatives business that did not reoccur, fourth quarter 2017 Segment EBITDA increased 14%.
Fiscal Year 2017 Results
Net sales for the year ended Dec. 31, 2017, were $3.6 billion, an increase of 4% compared with $3.4 billion in the prior year period. The increase in reported net sales was primarily driven by volume gains in base epoxy resins, Versatic Acids and Derivatives, global forest product resins and formaldehyde, and oilfield proppants businesses. Net sales increased 10% when adjusting for recent divestitures.
Segment EBITDA for the year ended Dec. 31, 2017, was $365 million, a decrease of 16% compared with the prior year period, or 9%, when adjusted for divestitures. In fiscal year 2017, growth in the company’s base epoxy resins and global forest product businesses partially offset declines in its specialty epoxy business.
Global Restructuring Programs
In 2017, the company achieved approximately $26 million of cost savings, including reductions in selling, general and administrative (SG&A) expenses and targeted site rationalizations. In addition, Hexion recently identified approximately $40 million in additional structural cost savings with approximately 90% of the savings related to headcount reductions. As of Dec. 31, 2017, Hexion had $50 million of total in-process cost savings comprised of $12 million in SG&A savings and $38 million in manufacturing savings. The company has taken the majority of the actions, and the impact will be essentially realized over the next 12 months.
Portfolio Optimization Initiatives
Hexion continues to position itself for profitable growth by strategically managing its portfolio. In January 2018, Hexion announced that it sold its ATG business to MÜNZING CHEMIE GmbH. The company received approximately $50 million in proceeds from the transaction. Hexion will use the sale proceeds for general corporate purposes.
In addition, Hexion has initiated a process for the sale of a portion of its Epoxy, Phenolic and Coatings Resins Segment. The company expects that sale proceeds will be used to reduce its debt.