OMNOVA Solutions Reports First-Quarter Results
FAIRLAWN, OH - OMNOVA Solutions Inc., Fairlawn, OH, announced income from continuing operations of $0.2 million, or breakeven per diluted share, for the first quarter ended February 28, 2013. Net loss for the first quarter was $0.2 million, or breakeven per diluted share. Included in the first-quarter results were restructuring, severance, manufacturing transition costs and other items that totaled $1.9 million pre-tax. These were primarily related to the closure of manufacturing operations at a plant, which had previously been disclosed.
"As we expected, operating results in our first quarter of 2013, which has been historically our weakest on a seasonal basis, were lower than last year. These results are not reflective of what we anticipate for the rest of the year. As previously disclosed, we lost significant volume in our coated paper chemicals markets late last year, which negatively impacted results in the first quarter. However, we have won new commitments that are expected to offset much of the lost volume, with product shipments beginning to ramp up in the second quarter. Additionally, weak volumes in both the European and Indian markets negatively impacted results," said Kevin McMullen, OMNOVA Solutions' Chairman and Chief Executive Officer. "While we had a weak start to the quarter, we were encouraged by the profit trend as the quarter progressed, with February results significantly stronger than the prior two months.
"We have made a number of structural improvements that we expect will begin contributing to increased operating profit during the remainder of the year, including new global manufacturing capability coming online and the completion of the Columbus, Mississippi manufacturing consolidation. In addition, we have recent new business commitments from customers and are seeing encouraging signs from key end markets in which we are well positioned such as housing, oil and gas exploration, personal hygiene, and transportation. As a result, we expect full-year 2013 Adjusted Income from Continuing Operations will exceed last year's performance," said McMullen.
Net sales decreased $24.2 million, or 8.8 percent, to $251.7 million for the first quarter of 2013, compared to $275.9 million for the first quarter of 2012. The sales decrease was driven by lower volume of $19.7 million, or 7.1 percent, and reduced pricing of $4.7 million, partially offset by favorable currency translation effects of $0.2 million.
Gross profit in the first quarter of 2013 decreased to $49.0 million, compared to $60.9 million in the first quarter of 2012, due primarily to the lower volumes. Raw material costs declined $3.1 million in the first quarter versus the same period last year. Gross profit margins in the first quarter of 2013 were 19.5 percent, compared to margins of 22.1 percent in the first quarter of 2012. The decline was due to the lower volumes, reduced pricing and related manufacturing cost absorption.
Selling, general and administrative expense (SG&A) in the first quarter of 2013 was $30.5 million, or 12.1 percent of sales, compared to $29.5 million, or 10.7 percent of sales, in the first quarter of 2012. The increase was due to higher outside services, health care and other employee costs.
Net loss for the first quarter of 2013 was $0.2 million, or breakeven per diluted share, compared to net income of $13.5 million, or $0.29 per diluted share, for the first quarter of 2012. This included a loss from discontinued operations of $0.4 million for the first quarter of 2013, compared to income from discontinued operations of $2.8 million, or $0.06 per diluted share, in the first quarter of 2012. Income from continuing operations for the first quarter of 2013 was $0.2 million, or breakeven per diluted share, compared to $10.7 million, or $0.23 per diluted share, for the first quarter of 2012. Adjusted Income From Continuing Operations was $1.5 million, or $0.03 per diluted share for the first quarter of 2013, compared to Adjusted Income From Continuing Operations of $10.0 million, or $0.22 per diluted share, in the first quarter of 2012.
As part of a strategy to focus on businesses with greater global growth potential, the company divested its North American and U.K.-based commercial wallcovering businesses in fiscal 2012, receiving proceeds of $16.2 million in cash and notes, along with the potential for future royalty payments. These businesses were classified as discontinued operations at the end of fiscal 2011. As part of a manufacturing transition agreement with the buyer, the company continued to operate a plant in Columbus, MS, which made commercial wallcovering and coated fabric products until February 2013, when production ceased.