Hexion Specialty Chemicals Announces 2009 Results
March 14, 2010
COLUMBUS, OH – Hexion Specialty Chemicals Inc. has reported its results for the fourth quarter and year ended December 31, 2009.
The company reported revenues of $1.09 billion in the fourth quarter of 2009 compared to $1.18 billion during the prior-year period, as the sales decline reflected the contractual pass through of lower raw material prices, which more than offset year-over-year volume gains and pricing actions.
Operating income was $36 million for the fourth quarter of 2009 compared to an operating loss of $876 million for the prior-year period. Fourth-quarter 2009 operating income improved compared to the prior year due to lower asset impairment and business realignment costs. Fourth-quarter 2008 results included $800 million in terminated merger expenses.
The company reported net loss attributable to Hexion Specialty Chemicals Inc. of $6 million for the 2009 quarter versus $921 million in the prior-year period. The fourth-quarter 2009 loss reflected the same factors impacting operating results and lower interest expense.
Segment EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $106 million in the fourth quarter of 2009 compared to $46 million during the prior-year period.
For full-year 2009, the company reported revenues of $4.0 billion versus $6.1 billion in 2008, with lower volumes accounting for $1.1 billion of the decline, the contractual pass through of lower raw-material costs reducing sales by $791 million and unfavorable foreign currency translation of $167 million.
In 2009, the company reported operating income of $94 million versus an operating loss of $893 million in 2008. Full-year 2009 results primarily reflected a reduction in terminated merger and settlement expense, as Hexion recorded $1,027 million in terminated merger and settlement costs in 2008. Hexion’s operating income also reflected the improvement in its gross profit as a percentage of net sales, which increased to 13 percent in 2009 compared to 10 percent in the prior-year period. Operating income also benefited from a $48 million reduction in selling, general and administrative expenses in 2009 versus 2008.
The company posted net income attributable to Hexion Specialty Chemicals Inc. of $92 million in 2009 compared to a net loss of $1,190 million in 2008, which reflected a $224 million gain on the extinguishment of $298 million in face value of outstanding debt securities and $81 million in decreased interest costs.
Hexion recorded 2009 segment EBITDA of $385 million versus $461 million in 2008. Adjusted EBITDA was $529 million for the year ended December 31, 2009.
“We continued to close the revenue gap versus the prior year, as our volumes increased by five percent in the fourth quarter of 2009 compared to the fourth quarter of 2008,” said Craig O. Morrison, Chairman, President and CEO. “Although certain end markets remain challenged, our segment EBITDA has been recovering due to gradually improving volumes and the cumulative impact of our cost reduction and productivity initiatives. Our fourth-quarter 2009 results were highlighted by strong performances in Specialty Epoxy and Phenolic resins, Versatic™ Acids and Derivatives, and our Oilfield resins, while our Coatings and Inks segment benefited from past restructuring efforts.”
Looking forward, Morrison said, “We were pleased with our ability to generate cash flow from operations in 2009, which totaled $355 million, as well as our ability to reduce working capital by $303 million in the past year, with working capital as a percentage of sales of 9.3 percent.
“We will continue to focus aggressively on cash management going forward. We also improved our capital structure in 2009 through careful cash management, the repurchase of a portion of our debt securities and our recent refinancing, which provided incremental liquidity and extended a significant amount of our maturities.
“Regarding customer demand, a high level of uncertainty remains in 2010, but we are guardedly optimistic that the signs of stabilization in several end markets will continue to drive a gradual improvement in our volumes. Regardless of market conditions, we are focused on creating value from the continued achievement of our productivity initiatives and growth from our specialty product applications. We also continue to strategically expand our operations in high-growth international markets, such as the construction of a new plant at our Onsan, Korea site, which will support our Versatic Acids and Derivatives products.
“Similar to 2009, we plan to focus on the items we can control in the coming year, including our cost-control initiatives, site restructurings and serving our customers. We believe that as the economy recovers, Hexion is well positioned to benefit from its lower cost structure and global customer base,” said Morrison.