COLUMBUS, OH -- Hexion Specialty Chemicals Inc. reported its results for the second quarter and six months ended June 30, 2009.
The company reported revenues of $947 million in the second quarter of 2009 compared to $1.67 billion during the prior-year period as the sales decline reflected lower volumes, negative foreign currency translation and the contractual pass through of lower raw material prices, which more than offset pricing actions.
An operating loss of $24 million was reported for the second quarter of 2009, which included $66 million in impairment costs associated with the idling of certain production facilities and restructuring costs associated with Hexion's productivity initiatives. This compares to an operating loss of $107 million for the prior-year period.
The company reported a net loss attributable to Hexion Specialty Chemicals Inc. of $71 million for the 2009 quarter versus a net loss of $181 million in the prior year period. Second-quarter 2009 results reflected the same items impacting operating loss and decreased interest expense, as well as a $14 million gain from the extinguishment of debt for amounts less than the face value of the debt securities.
Segment EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $90 million in the second quarter of 2009 compared to $131 million during the prior-year period. Lower volumes and reduced operating rates negatively impacted second-quarter segment EBITDA compared to the second quarter of 2008.
Sales for the first six months of 2009 were $1.86 billion, a decrease of $1.44 billion compared to the first half of 2008, driven primarily by volume and raw material price declines across Hexion's major product lines. In the first half of 2009, the company had an operating loss of $12 million, which included $85 million in restructuring and impairment costs, compared to an operating loss of $24 million in the first half of 2008. Hexion posted net income of $45 million for the first six months of 2009 versus a net loss of $193 million in the first six months of 2008, which reflected a $32 million decrease in interest expense and a $10 million decrease in income tax expense. In addition, during the first six months of 2009, Hexion recognized a gain of $182 million on the extinguishment of $217 million in face value of outstanding debt securities. In the first six months of 2009, the company generated $254 million in cash flow from operations versus $11 million in 2008.
"As expected, second-quarter 2009 sales and volumes improved slightly compared to the first quarter of 2009, but remained significantly below second-quarter 2008 levels," said Craig O. Morrison, Chairman, President and CEO. "Sequential improvement in second-quarter 2009 EBITDA reflected the positive impact of productivity actions, modest volume improvements and seasonality of the business.
"Due to the challenging market conditions, we remain vigilant in our cost control efforts. Since completion of the third quarter of 2008 when Hexion announced its incremental productivity targets, the company has realized $71 million in productivity savings. These actions have helped to decrease our non-raw material costs by $177 million during the first six months of 2009 across numerous areas, such as utilities, wages, travel and manufacturing variable expenses. At June 30, 2009, we had an additional $181 million of planned productivity actions in process. Senior management is working closely with our global business leaders to ensure that we achieve our targeted cost savings as planned."
"Looking ahead, we believe the global economy will moderately strengthen during the third quarter of 2009, but we anticipate it will remain significantly below prior year trends," Morrison said.