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OMNOVA Reports Earnings, Sales Increases

Thursday, July 1, 2010

Decorative-products and performance-chemicals manufacturer OMNOVA Solutions reported second-quarter net income of $15.1 million, a nearly 200% increase from the second quarter of 2009. Sales for the quarter rose 40%, to $226.4 million, due to a strengthening economy, new-product introductions, and expansion into new markets, the company said.

Net income for the quarter included a one-time gain of $2.1 milllion, primarily related to the dissolution of a joint venture.

The increase in sales resulted from a volume gain of $25.6 million, higher selling prices that added $37.5 million, and favorable foreign currency translation effects, responsible for a $2 million increase. Gross profit improved to $47.2 million, with margins of 20.8%, in the second quarter of 2010, compared to $40.0 million and margins of 24.8% in the second quarter of 2009. The decline in gross-profit margin was primarily due to higher raw-material costs and product mix, partially offset by higher selling prices, the company said.

Improved earnings and sales reflect “the fundamental improvements we have made in our company and improving economic conditions,” said Kevin McMullen, chairman and CEO.”We have made significant progress on many fronts, including the introduction of numerous innovative products, penetration into new, adjacent markets, the continued globalization of our business, and aggressive productivity gains and cost reductions.”

McMullen said the company has recorded six consecutive quarters of year-over-year earnings improvement, with the second-quarter volume expansion being broad based, as both its business segments posted volume gains of more than 15%.

For the company’s Decorative Products segment, second-quarter sales rose 18.2% from the second quarter of 2009, to $87.8 million. The segment reported an operating loss of $4.5 million, compared to net income of $0.2 million for the same period a year earlier. Included in the loss was a non-cash impairment charge of $6.2 million related to a write-down of manufacturing assets for the coated-fabrics and wallcovering product lines, reflecting the transfer of certain products to other facilities and weaker market conditions for commercial wallcoverings. Sales improved in six of the segment’s seven product categories, with the strongest growth coming from the domestic laminates and Asian businesses.

For the Performance Chemicals segment, second-quarter sales increased 59.3%, to $138.6 million, from the second quarter of 2009. Segment operating profit was $26.7 million, up from $11.4 million for the year-earlier period. The segment also recorded a gain of $9.7 million related to the dissolution of the RohmNova joint venture with Rohm and Haas Company. The action was the result of the acquisition of Rohm and Haas by The Dow Chemical Company.