OMNOVA Solutions Reports Fourth-Quarter Results
FAIRLAWN, OH - OMNOVA Solutions Inc. announced a net loss of $10.4 million, or a diluted loss per share of $0.23, for the fourth quarter ended November 30, 2011. Included in the fourth-quarter net loss was a loss from discontinued operations of $16.7 million, or a diluted loss per share of $0.37, related primarily to non-cash asset impairment charges of $13.6 million.
“Operating profit improved sequentially in the fourth quarter despite continued weakness in market demand,” said Kevin McMullen, OMNOVA Solutions' Chairman and Chief Executive Officer. "Fourth-quarter results were positively impacted by lower raw material input costs, which declined from an all-time high in the third quarter, but were still higher than the prior year. We also generated positive cash during the quarter and increased our cash balance to approximately $106 million.
"For full-year 2011, the company achieved record operating profit despite unprecedented raw material inflation. Our Performance Chemicals business, including ELIOKEM, achieved its best annual profit performance, and the ELIOKEM acquisition was accretive in the first year. As we celebrate the one-year anniversary of the ELIOKEM acquisition, we are very enthusiastic about the long-term value we can create together,” McMullen said.
As part of the company's strategy to focus on businesses with greater global growth potential, the company decided in the fourth quarter of 2011 to exit commercial wallcovering, and these businesses were classified as discontinued operations. On December 12, 2011, the company completed the sale of the North American commercial wallcovering business. Total sale proceeds from the North American assets were $10.0 million along with potential future royalty payments.
The company's European-based commercial wallcovering business, known as Muraspec, serves the global commercial wallcovering market outside of North America, including Asia. Muraspec has operated on a stand-alone basis and will continue business as usual to design, produce, sell and service its commercial wallcovering and other products. The company is pursuing the sale of the ongoing Muraspec business.
Net sales increased $111.1 million, or 58 percent, to $301.4 million for the fourth quarter of 2011, compared to $190.3 million for the fourth quarter of 2010. The sales improvement was driven by $81.8 million of revenues from the ELIOKEM acquisition and increased OMNOVA legacy sales of $29.3 million. The higher OMNOVA legacy sales resulted from price increases of $44.4 million and $2.0 million of favorable currency translation effects, which were partially offset by volume decreases of $17.1 million.
Gross profit in the fourth quarter of 2011 increased to $55.8 million, compared to $32.0 million in the fourth quarter of 2010, due primarily to the ELIOKEM acquisition. Raw material costs in OMNOVA's legacy business increased $39.4 million in the fourth quarter versus the same period last year. Gross profit margins in the fourth quarter of 2011 were 18.5 percent, compared to margins of 16.8 percent in the fourth quarter of 2010. The increase in gross profit margin percentage was due primarily to productivity and pricing actions.