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OMNOVA Solutions Inc. Reports Operating Results (10-Q)

October 07, 2009 | About:

10qk

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OMNOVA Solutions Inc. (OMN) filed Quarterly Report for the period ended 2009-08-31.

Omnova Solutions Inc. develops manufactures and markets emulsion polymersspecialty chemicals and decorative and building products for a variety ofindustrial commercial and consumer markets. The Performance Chemicals unit's broad range of emulsion polymers and specialty chemicals are used as coatings binders adhesives and additives for paper carpet textile and various other industries. Omnova Solutions Inc. has a market cap of $307.8 million; its shares were traded at around $7.02 with a P/E ratio of 17.1 and P/S ratio of 0.3. Omnova Solutions Inc. had an annual average earning growth of 2.1% over the past 5 years.

Highlight of Business Operations:

Performance Chemicals net sales decreased $41.1 million, or 28.2%, to $104.4 million in the third quarter of 2009 compared to $145.5 million in the third quarter of 2008. The decrease in sales was driven by lower selling prices of $35.3 million as a result of lower raw material costs, volume decreases of $4.5 million and unfavorable foreign exchange translation of $1.3 million. While volumes were weaker year-over-year, the Company has experienced higher volumes in the third quarter of 2009 compared to the second quarter of 2009 and expects volumes in the fourth quarter of 2009 to be higher than in the fourth quarter of 2008. Net sales for the Paper and Carpet chemicals product line decreased to $64.5 million during the third quarter of 2009 compared to $94.2 million during the third quarter of 2008. Net sales for the Specialty Chemicals product line decreased to $39.9 million during the third quarter of 2009 compared to $51.3 million during the third quarter of 2008.

Performance Chemicals net sales decreased 26.6% to $286.0 million during the first nine months of 2009 compared to $389.6 million during the first nine months of 2008. The decrease in sales was driven by lower volumes of $57.3 million, lower selling prices of $41.2 million and $5.1 million of unfavorable foreign exchange translation. Net sales for the Paper and Carpet chemicals product line decreased to $178.4 million during the first nine months of 2009 compared to $251.6 million during the first nine months of 2008. Net sales for the Specialty Chemicals product line decreased to $107.6 million during the first nine months of 2009 compared to $138.0 million during the first nine months of 2008.

This segment generated an operating profit of $34.0 million in the first nine months of 2009 compared to $15.0 million in the first nine months of 2008. The improvement in segment operating profit was due to lower raw material costs of $67.5 million and favorable manufacturing and other costs of $1.2 million partially offset by a reduction in selling prices of $41.2 million, lower volumes of $13.1 million and asset write-offs of $0.7 million. Included in the first nine months of 2009 is a reduction of the LIFO inventory reserve of $4.6 million, a net pension plan curtailment charge of $0.3 million and restructuring and severance charges of $0.1 million.

Decorative Products net sales decreased by 13.1% to $81.7 million in the third quarter of 2009 from $94.0 million in the third quarter of 2008 primarily due to lower volumes of $10.8 million and unfavorable foreign exchange translation of $2.0 million, partially offset by favorable pricing of $0.5 million. Included in the third quarter 2009 results are four months of financial results for the Decorative Products Asian businesses which were previously reported on a one-month lag, but are consolidated on a current basis beginning with the third quarter of 2009. This resulted in additional sales and segment operating profit of $8.0 million and $0.2 million, respectively. Commercial Wallcovering and Coated Fabrics net sales were $58.5 million during the third quarter of 2009 compared to $70.2 million in the third quarter of 2008. Net sales for the Decorative Laminates and Performance Films product line were $23.2 million during the third quarter of 2009 compared to $23.8 million during the third quarter of 2008.

Decorative Products net sales decreased by 14.8% to $221.6 million in the first nine months of 2009 from $260.2 million in the first nine months of 2008 primarily due to lower volumes of $51.7 million and unfavorable foreign exchange translation of $9.9 million partially offset by $2.6 million of favorable pricing and additional sales at the Decorative Products Asian businesses of $20.4 million. Commercial Wallcovering and Coated Fabrics net sales were $160.0 million during the first nine months of 2009 compared to $187.1 million in the first nine months of 2008. Net sales for the Decorative Laminates and Performance Films product line decreased to $61.6 million during the first nine months of 2009 compared to $73.1 million during the first nine months of 2008.

The segment operating loss was $2.0 million for the first nine months of 2009 compared to $1.2 million for the first nine months of 2008. The decrease was primarily due to lower volumes of $13.5 million, partially offset by improved profit on Asian businesses of $6.2 million, a reduction in raw material costs of $4.4 million, improved selling prices of $2.6 million and lower manufacturing costs of $0.8 million. The segment operating profit for 2009 also included flood-related costs of $0.6 million, restructuring and severance charges of $1.8 million due to workforce reductions and a pension plan curtailment gain of $0.7 million while 2008 includes restructuring and severance charges of $0.4 million due to asset write-offs and plant closure costs.

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