OMNOVA Solutions Reports Results for 2012
FAIRLAWN, OH - OMNOVA Solutions Inc. announced income from continuing operations of $1.2 million, or $0.02 per diluted share, for the fourth quarter ended November 30, 2012. Net income for the fourth quarter was $0.7 million, or $0.01 per diluted share. Adjusted income from continuing operations for the fourth quarter of 2012 was $3.2 million, or $0.07 per diluted share, as compared to $5.9 million, or $0.13 per diluted share last year. Results in the quarter were negatively impacted by LIFO expense of $1.8 million (net of tax), or $0.04 per diluted share, primarily related to the inventory build for the transition of coated fabrics manufacturing to other, more efficient OMNOVA plants due to the wind-down of manufacturing operations in Columbus, MS.
"The fourth quarter results were negatively impacted by weakness in global demand, particularly in Europe and in the North American paper industry, as well as several one-time unusual items. During the year, we made structural improvements in our business portfolio, and took many other positive actions that drove continued improvement in our full-year profitability, and generated significant cash flow, which allowed us to reduce our net leverage to 2.75 times," said Kevin McMullen, OMNOVA Solutions' Chairman and Chief Executive Officer.
"As we look forward to 2013, we are encouraged by a number of actions and market developments that are expected to gain traction starting in the second quarter and, as a result, we believe the company will continue to improve earnings in fiscal 2013. Among those actions are several recent new business wins, including one which was driven by the conversion of U.S.-based styrene butadiene latex capacity to a new high styrene chemistry application. Engineered Surfaces expects further profit improvement beginning in the second quarter after the wind-down of the Columbus, Mississippi, manufacturing operations and the transition of coated fabrics manufacturing to more efficient OMNOVA facilities. Later in the year, we will have increased our Performance Chemicals capabilities in China with expanded specialty chemistry offerings to our customers as we commission the new capacity addition at our Caojing site. Finally, the company continues to make progress on productivity and cost reduction actions with over $8 million of non-raw material improvements expected in 2013.
"In addition, we are encouraged by a number of market developments including the continuing momentum of the U.S. housing recovery, rapid growth in oil and gas exploration and production, a strong outlook for automotive and transportation segments in North America and Asia, and growing demand, particularly in developing regions of the world, for personal hygiene products. OMNOVA has a strong pipeline of new products and is well positioned to serve these markets," said McMullen.
Net sales decreased $47.5 million, or 15.8 percent, to $253.9 million for the fourth quarter of 2012, compared to $301.4 million for the fourth quarter of 2011. The sales decrease was driven by price reductions of $28.0 million, or 9.3 percent, reduced volumes of $16.4 million, or 5.5 percent, and unfavorable foreign currency translation effects of $3.1 million, or 1.0 percent.
Gross profit in the fourth quarter of 2012 decreased to $48.5 million, compared to $55.8 million in the fourth quarter of 2011, driven primarily by lower sales volume. Raw material costs decreased $31.7 million in the fourth quarter versus the same period last year. Gross profit margins in the fourth quarter of 2012 improved to 19.1 percent, compared to margins of 18.5 percent in the fourth quarter of 2011.
Selling, general and administrative expense in the fourth quarter of 2012 was $29.1 million, compared to $26.0 million in the fourth quarter of 2011. The increase was due to higher employment-related, research and development and information technology costs.
Net income for the fourth quarter of 2012 was $0.7 million, or $0.01 per diluted share, compared to a loss of $10.4 million, or $0.23 per diluted share, for the fourth quarter of 2011. Included in the fourth quarter of 2012 are losses from discontinued operations of $0.5 million, or $0.01 per diluted share, compared to a loss from discontinued operations of $16.7 million, or $0.37 per diluted share, in the fourth quarter of 2011, primarily related to the decision to exit the global wallcovering businesses and the related write-down of manufacturing assets in Columbus, Mississippi.
Net sales decreased $75.6 million, or 6.3 percent, to $1,125.5 million for 2012, compared to $1,201.1 million for 2011. The sales decrease was driven by reduced volumes of $60.4 million, or 5.0 percent, which was partially offset by price increases of $0.8 million, or 0.1 percent. Currency translation effects were $16.0 million unfavorable, or 1.4 percent of sales.
Gross profit in 2012 increased to $227.2 million, compared to $218.6 million in 2011, driven primarily by a change in sales mix and lower raw material costs. Raw material costs decreased $23.0 million in 2012 versus fiscal 2011. Gross profit margins in 2012 improved to 20.2 percent, compared to margins of 18.2 percent in fiscal 2011.
Net Income for 2012 was $27.6 million, or $0.60 per diluted share, compared to a loss of $2.8 million, or $0.06 per diluted share, for 2011. Included in 2012 net income is income from discontinued operations of $1.9 million, or $0.04 per diluted share, compared to a loss from discontinued operations of $19.5 million, or $0.43 per diluted share, in 2011 primarily related to the decision to exit the global wallcovering businesses and a related write-down of manufacturing assets.
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