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

June 30, 2010 | About:
10qk

10qk

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OMNOVA Solutions Inc. (OMN) filed Quarterly Report for the period ended 2010-05-31.

Omnova Solutions Inc. has a market cap of $324.5 million; its shares were traded at around $7.27 with a P/E ratio of 9.1 and P/S ratio of 0.5. OMN is in the portfolios of Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

Performance Chemicals net sales increased $51.6 million, or 59.3%, to $138.6 million during the second quarter of 2010 compared to $87.0 million during the second quarter of 2009. The higher sales were driven by stronger volume of $13.7 million, higher selling prices of $37.5 million and favorable foreign currency exchange effects of $0.4 million. Paper and Specialty Chemicals volumes were up year over year but Carpet Chemicals volumes were down. Net sales for the Paper and Carpet Chemicals product line increased $34.1 million to $86.1 million during the second quarter of 2010 compared to $52.0 million during the second quarter of 2009. Net sales for the Specialty Chemicals product line increased $17.5 million to $52.5 million during the second quarter of 2010 compared to $35.0 million during the second quarter of 2009.

This segment generated an operating profit of $26.7 million in the second quarter of 2010. Included in the operating profit is the gain of $9.7 million for the dissolution of the RohmNova joint venture as previously described. Excluding this gain, operating profit would have been $17.0 million for the second quarter of 2010 compared to $11.4 million in the second quarter of 2009, an improvement of $5.6 million. The increase in segment operating profit was primarily due to higher volumes of $4.7 million, higher pricing of $37.5 million and $3.1 million of lower manufacturing costs and SG&A expense offset by higher raw material costs of $37.0 million. Additionally, this segment recorded LIFO expense of $1.3 million in the second quarter of 2010 compared to LIFO income of $2.4 million in the second quarter of 2009. Segment operating profit also includes other items which management excludes when evaluating the results of the Companys segments. Those items for the second quarter of 2009 include an asset write-off of $0.7 million and a pension curtailment loss of $0.3 million.

Performance Chemicals net sales increased $69.8 million, or 38.4%, to $251.4 million during the first half of 2010 compared to $181.6 million during the first half of 2009. The higher sales were driven by stronger volume of $28.8 million, higher selling prices of $40.0 million and favorable foreign currency exchange effects of $1.0 million. Net sales for the Paper and Carpet Chemicals product line increased $43.5 million to $157.4 million during the first half of 2010 compared to $113.9 million during the first half of 2009. Net sales for the Specialty Chemicals product line increased $26.3 million to $94.0 million during the first half of 2010 compared to $67.7 million during the first half of 2009.

This segment generated an operating profit of $40.5 million in the first half of 2010. Included in the operating profit is the gain of $9.7 million for the dissolution of the RohmNova joint venture as previously described. Excluding this gain, operating profit would have been $30.8 million for the first half of 2010 compared to $19.2 million in the first half of 2009, an improvement of $11.6 million. The increase in segment operating profit was primarily due to higher volumes of $9.7 million, higher pricing of $40.0 million and $5.8 million of lower manufacturing cost and SG&A expense partially offset by higher raw material costs of $37.8 million. Additionally, this segment recorded LIFO expense of $1.9 million in the first half of 2010 compared to LIFO income of $5.0 million in the first half of 2009. Segment operating profit also includes other items which management excludes when evaluating the results of the Companys segments. Those items for the first half of 2010 include workforce reduction costs of $0.2 million and for the first half of 2009, asset write-offs of $0.7 million and a pension curtailment loss of $0.3 million.

This segment had an operating loss of $4.5 million in the second quarter of 2010. Included in the operating loss is an asset impairment charge of $6.2 million for the write-down of machinery and equipment at its Columbus, Mississippi facility to fair value. The impairment was caused by the loss of business, transfer of certain products to other Company facilities to better meet customer demand and weaker market conditions for commercial wallcovering which is not expected to recover to historical levels. The assets were written down to their estimated fair value using a cost approach. Excluding the asset impairment, segment operating profit would have been $1.7 million compared to an operating profit of $0.2 million for the second quarter of 2009, an improvement of $1.5 million. The increase in segment operating profit was primarily due to cost reductions of $1.6 million and higher volumes of $1.7 million partially offset by higher raw material costs of $1.2 million. Segment operating profit also includes other items which management excludes when evaluating the results of the Companys segments. Those items for the second quarter of 2010 include work stoppage costs of $0.4 million and legal settlement expense of $0.3 million, and for the second quarter of 2009, a pension curtailment gain of $0.7 million and workforce reduction costs of $0.8 million.

This segment had an operating loss of $4.6 million for the first half of 2010. Included in the operating loss is an asset impairment charge of $6.2 million previously described. Excluding the asset impairment, segment operating profit would have been $1.6 million compared to an operating loss of $2.7 million for the first half of 2009, an improvement of $4.3 million. The increase in segment operating profit was primarily due to cost reductions of $4.3 million and higher volumes of $0.6 million partially offset by higher raw material costs of $0.6 million. Segment operating profit also includes other items which management excludes when evaluating the results of the Companys segments. Those items for the first half of 2010 include work stoppage costs of $0.4 million, legal settlement expense of $0.3 million and workforce reduction costs of $0.1 million and for the first half of 2009, a pension curtailment gain of $0.7 million and workforce reduction costs of $1.5 million.

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