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Mayank Marwah
Mayank Marwah
Articles (627) 

Key Takeaways From KMG Chemicals 3rd Quarter Earnings

Banking on continued growth of its performance material segment, the company issued robust full-year guidance

June 13, 2018 | About:

The global provider of specialty chemicals and performance materialsKMG Chemicals Inc. (NYSE:KMG) has reported its third quarter financial results.

Diving into the numbers

On Thursday, the company reported sales during the quarter soared 45% on a year-over-year basis to $118.6 million. The company’s GAAP diluted earnings per share doubled to 98 cents per share from the third quarter of last year.

KMG’s chairman and CEO, Chris Fraser, was very pleased with the company’s quarterly performance as he said:

“KMG achieved outstanding third quarter results, driven by strong organic growth in our electronic chemicals and performance materials segments, as well as a significant contribution from the acquisition of Flowchem,” He further added: “Adjusted Ebitda and adjusted diluted earnings per share also reached record levels, reflecting product volume growth and continued efficiency improvements across our global operations.”

GAAP net income in the third quarter rose to $15.6 million, up from $6.1 million reported in the year-ago quarter. The company’s operating cash flow nearly tripled from last year’s third quarter to a record $21.5 million. KMG’s operating income during the quarter, despite rising freight cost, grew an astounding 28% from the year-ago quarter amounting to $10.9 million.

Segment details

The company’s electronic chemicals sector performed magnificently during the quarter with record sales of $74.7 million representing a 10% sales growth on a year over year basis thanks to immense product volume growth in each of the major geographic regions. While the operating income of the segment stood at $10.9 million, its operating margin surged 14.6% as compared to last year’s growth of 12.5%.

The company’s performance material segment also witnessed record results as sales more than tripled to $44 million in the third quarter on a year over year basis. The sector’s operating income came in at $16 million, which was a new quarterly record. The sector’s operating margin during the quarter was 36.5%.

The company’s pipeline business also had an active market during the quarter. The company’s wood-treating chemical business, which supplies products that are beneficial to conserve North America's expansive wood-based utility pole infrastructure, also contributed substantially to its overall quarterly growth.

Guidance

Having witnessed astonishing financial results, be it third quarter or through the first nine months of fiscal 2018, Fraser came out with a fine full-year outlook. The company projects net sales for the whole year to lie between $455 and $465 million. The company’s sees adjusted Ebitda to be around $118 million to $120 million. Furthermore, depreciation and amortization expenses are estimated to be roughly $30 million for the year. Capital expenditure for the same period is projected to be around $25 million.

Disclosure: I do not hold any position in the stock mentioned in this article.

About the author:

Mayank Marwah
A seasoned writer with keen interest in the automotive, technology, telecommunication, retail and aerospace sectors.

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