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Cytec Industries Inc. Reports Operating Results (10-Q)

July 28, 2010 | About:
10qk

10qk

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Cytec Industries Inc. (CYT) filed Quarterly Report for the period ended 2010-06-30.

Cytec Industries Inc. has a market cap of $2.47 billion; its shares were traded at around $50.35 with a P/E ratio of 16.5 and P/S ratio of 0.9. The dividend yield of Cytec Industries Inc. stocks is 0.1%.CYT is in the portfolios of Kenneth Fisher of Fisher Asset Management, LLC, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates, Steven Cohen of SAC Capital Advisors, Jeremy Grantham of GMO LLC.

Highlight of Business Operations:

Manufacturing cost of sales was $666.8 or 76.3% of sales in the second quarter of 2010, compared with $603.0, or 88.0% of sales in the second quarter of 2009. The 11.7% decrease in manufacturing cost as a percent of sales, is primarily due to improved manufacturing costs leverage on the increased volume obtained across our segments and lower restructuring charges. Total manufacturing cost of sales increased by $63.8 due to $58.0 related to higher selling volumes, $45.1 due to higher raw material costs, and $20.3 due to higher freight and period costs related to the increased selling volumes. Additionally, manufacturing cost of sales increased by $7.2 due to the elimination of the 2009 short term cost reductions discussed above. The second quarter of 2010 includes $5.1 of costs related to the exit of certain phosphorus derivative products at our Mt. Pleasant manufacturing facility. These increases were partially offset by favorable fixed costs absorption of $38.2 related to increased production as well as the initiative to lower inventory levels in 2009 and favorable changes in exchange rate of $9.6 of which $8.0 related to raw material costs. The second quarter of 2009 includes a restructuring charge of $23.9 which includes manufacturing cost savings initiatives launched within our Specialty Chemical segments in the second quarter of 2009 to transfer manufacturing currently at our Drogenbos, Belgium and Hamburg, Germany sites to other manufacturing locations as well as a restructuring initiative launched in the second quarter of 2009 within our Engineered Materials segment. See Note 3 to the consolidated financial statements for additional detail.

Earnings from operations were $28.0 or 8% of sales in 2010 compared to a loss of $19.2 or (7%) of sales in 2009. The $47.2 improvement is primarily driven by $31.9 from increased sales volumes, $21.8 of improved plant leverage on increased volume as well as the initiative to lower inventories in 2009, increased selling prices of $7.2, and lower raw material costs of $4.1. These positive impacts were partially offset by increased freight costs of $6.2 due to higher selling volumes, higher costs of $11.4 related to the elimination of the short term cost savings initiatives and higher operating expenses, and $0.3 from changes in exchange rates.

Earnings from operations were $10.7 or 16% of sales in 2010, compared to $3.1 or 5% of sales in 2009. The $7.6 increase in earnings is primarily due to the improvement in demand with $3.4 related to increased selling volumes net of the impact related to the exit of our polyurethane product line in 2009, $3.2 related to lower raw material costs, $2.2 related to improved plant leverage on increased volume as well as the initiative to lower inventories in 2009, and $1.4 related to increased selling prices. These positive impacts were partially offset by increased freight costs of $1.4 due to higher selling volumes and $1.1 due to the elimination of the short term savings initiatives and higher operating expenses.

Earnings from operations were $14.3 or 20% of sales in 2010, compared with $2.1 or 4% of sales in 2009. The $12.2 increase in earnings is principally due to increased selling volumes of $9.4, lower raw material costs of $5.8, and $3.0 related to improved plant leverage on increased volume as well as the initiative to lower inventories in 2009. These positive impacts were partially offset by the elimination of the short term savings initiatives and higher operating expenses of $3.0, increased freight costs of $1.3 due to higher selling volumes, lower selling prices of $0.7, and changes in exchange rates of $1.0.

Earnings from operations were $38.6 or 20% of sales in 2010, compared with $22.1 or 12% of sales in 2009. The $16.5 increase in earnings includes $12.7 of benefits primarily associated with higher fixed cost absorption into inventory due to increased production levels, increased selling volumes of $11.7, increased selling prices of $0.7, and changes in exchange rates of $0.3. These positive impacts were partially offset by higher operating expenses of $3.0, which include higher research and development spending and higher overall benefit costs, increased manufacturing and freight costs of $5.6 due to higher selling volumes, and higher raw material costs of $0.4.

Manufacturing cost of sales was $1,290.0 or 77.7% of sales for the first six months of 2010 compared with $1,100.8 or 84.9% of sales for the first six months of 2009. The 7.2% decrease in manufacturing cost of sales as a percent of sales is primarily attributable to improved manufacturing costs leverage on the increased volume and lower restructuring charges. Manufacturing cost of sales increased $189.2 due to $135.8 related to higher selling volumes, $81.7 related to higher raw material costs, $31.0 related to higher freight and period costs related to the increased selling volumes, and $5.7 related to changes in exchange rates of which $5.1 related to period costs. Additionally, manufacturing cost of sales increased by $10.6 due to the elimination of the 2009 short term cost reductions discussed above. The first six months of 2010 includes $5.1 of costs related to the exit of a phosphorus product at our Mt. Pleasant manufacturing facility. These increases were partially offset by favorable fixed costs absorption of $42.5 related to increased production as well as the initiative to lower inventory levels in 2009 and lower manufacturing costs of $10.7 principally related to cost savings initiatives. Manufacturing cost of sales for the first six months of 2009 includes restructuring charges of $26.0 which includes manufacturing cost savings initiatives launched within our Specialty Chemical segments in the second quarter of 2009. See Note 3 to the consolidated financial statements for additional detail.

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