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Albemarle Reports Third Quarter 2015 Earnings of USD 65.4 Million

Published on 2015-11-16. Author : SpecialChem

Albemarle Corporation reported third quarter 2015 earnings of $65.4 million, or $0.58 per diluted share, compared to third quarter 2014 earnings of $72.8 million, or $0.93 per diluted share. Third quarter 2015 adjusted earnings were $100.9 million, or $0.90 per diluted share, compared to $89.5 million, or $1.14 per diluted share, for the third quarter of 2014 (see notes to the condensed consolidated financial information). The Company reported net sales of $905.1 million in the third quarter of 2015, up from net sales of $642.4 million in the third quarter of 2014, driven primarily by the acquisition of Rockwood Holdings, Inc. ("Rockwood"), which closed January 12, 2015, partly offset by the impact of lower sales volumes and unfavorable currency exchange impacts.

Albemarle
Fig. 1: Albemarle

Earnings for the nine months ended September 30, 2015 were $160.7 million, or $1.44 per diluted share, compared to $151.8 million, or $1.91 per diluted share, for the same period in 2014. Adjusted earnings for the nine months ended September 30, 2015 (including $52.4 million in non-cash currency exchange transaction gains from the first quarter) were $323.2 million, or $2.91 per diluted share, compared to $254.7 million, or $3.21 per diluted share, for 2014. Net sales for the nine months ended September 30, 2015 were $2.72 billion, up from net sales of $1.85 billion, driven primarily by the acquisition of Rockwood, partly offset by the impact of lower sales volumes and unfavorable currency exchange impacts.

"Albemarle's core businesses continued to perform well in the third quarter. Through the first nine months of 2015, these businesses delivered 8% adjusted EBITDA growth and 30% margin rates on a constant currency basis," said Albemarle's President and CEO, Luke Kissam. "Our integration synergies have exceeded expectations to date, and our free cash flow remains in-line with prior guidance."

The acquisition of Rockwood was completed on January 12, 2015 for a purchase price of approximately $5.7 billion. The cash consideration was funded with proceeds from senior notes the Company issued in 2014 and borrowings under the Company's term loan credit agreement, cash bridge facility and revolving credit agreement. The results of Rockwood from January 1, 2015 to January 12, 2015 ("stub period") are excluded from the year-to-date financial results presented herein. Excluded net sales and adjusted EBITDA for the stub period were $33.2 million and $3.4 million, respectively.

Quarterly Segment Results

In order to provide a meaningful comparison of the results of operations, where applicable, segment results for the third quarter and nine months ended September 30, 2015 are compared to pro forma segment results for the comparative periods of 2014. The 2014 pro forma segment results are based on the historical combined consolidated financial statements of Albemarle and Rockwood and were prepared to illustrate the effects of the integration of the Rockwood business, as well as the first quarter 2015 change in reporting structure. This supplemental pro forma financial information is also located on the Company's website and in Albemarle's Current Report on Form 8-K which was filed on April 13, 2015.

Performance Chemicals reported net sales of $399.5 million in the third quarter of 2015, a decrease of 4.2% from third quarter 2014 pro forma net sales of $417.1 million. Net sales were impacted by $16.6 million of unfavorable currency exchange impacts as compared to the prior year. The remaining $1.0 million decrease in net sales was predominantly due to lower sales volumes for Bromine almost fully offset by higher Lithium and Performance Catalyst Solutions ("PCS") sales volumes and favorable pricing in Bromine, Lithium and PCS. Adjusted EBITDA for Performance Chemicals was $136.2 million, an increase of 6.2% from third quarter 2014 pro forma results of $128.2 million. Adjusted EBITDA was impacted by $5.9 million of unfavorable currency exchange impacts as compared to the prior year. The remaining $13.9 million increase in adjusted EBITDA was primarily driven by favorable Bromine, Lithium and PCS pricing as well as earnings from our Talison joint venture, offset slightly by lower overall sales volumes.

Refining Solutions generated net sales of $185.1 million in the third quarter of 2015, a decrease of 15.5% from net sales of $219.0 million in the third quarter of 2014. Net sales were impacted by $9.1 million of unfavorable currency exchange impacts as compared to the prior year. The remaining $24.8 million decrease in net sales was primarily driven by unfavorable Clean Fuels Technology volumes and price partly offset by favorable Heavy Oil Upgrading volumes. Adjusted EBITDA for Refining Solutions was $54.5 million in the third quarter of 2015, a decrease of 11.6% from third quarter 2014 results of $61.7 million. Adjusted EBITDA was impacted by $3.3 million of unfavorable currency exchange impacts as compared to the prior year. The remaining $3.9 million decrease in adjusted EBITDA was primarily due to lower Clean Fuels Technology sales volumes and price partly offset by favorable Heavy Oil Upgrading volumes.

Chemetall® Surface Treatment reported net sales of $211.9 million in the third quarter of 2015, an increase of 1.5% from third quarter 2014 pro forma net sales of $208.8 million. Net sales were impacted by $26.3 million of unfavorable currency exchange impacts as compared to the prior year. The remaining $29.4 million increase in net sales was primarily due to increased sales volumes related to the acquisition of the remaining shares of the Chemetall Shanghai joint venture in February of this year and favorable pricing. Adjusted EBITDA for Chemetall Surface Treatment was $53.9 million in the third quarter of 2015, an increase of 4.7% from third quarter 2014 pro forma results of $51.5 million. Adjusted EBITDA was impacted by $5.5 million of unfavorable currency exchange impacts as compared to the prior year. The remaining $7.9 million increase in adjusted EBITDA was primarily due to higher overall sales volumes and favorable pricing offset slightly by increased selling, general, and administrative expenses primarily associated with the Chemetall Shanghai joint venture acquisition.

All Other net sales were $102.2 million in the third quarter of 2015, a decrease of 32.3% from pro forma net sales of $151.1 million in the third quarter of 2014. Net sales were impacted by $12.9 million of unfavorable currency exchange impacts as compared to the prior year. The remaining $36.0 million decrease in net sales was primarily due to unfavorable Fine Chemistry Services volumes. All Other adjusted EBITDA was $6.3 million in the third quarter of 2015, a decrease of 77.2% from third quarter 2014 pro forma results of $27.4 million. Adjusted EBITDA was impacted by $1.4 million of unfavorable currency exchange impacts as compared to the prior year. The remaining $19.7 million decrease in adjusted EBITDA was primarily due to lower Fine Chemistry Services sales volumes offset slightly by lower selling, general and administrative expenses.

In summary, total net sales of $905.1 million, a decrease of $93.6 million or 9.4% from third quarter 2014 pro forma net sales of $998.7 million, was unfavorably impacted by currency exchange of $64.9 million. Excluding currency exchange impacts, net sales for the period would have been down 2.9% as compared to the prior year. Total adjusted EBITDA of $235.0 million, a decrease of $1.2 million or 0.1% from third quarter 2014 pro forma adjusted EBITDA of $236.2 million, was unfavorably impacted by currency exchange of $16.5 million (including $0.4 million of unfavorable foreign currency exchange impacts on Corporate results). Excluding currency exchange impacts, adjusted EBITDA for the period would have been up 6.5% as compared to the prior year.

Corporate Results

Corporate adjusted EBITDA was $(15.9) million in the third quarter of 2015 compared to $(32.6) million pro forma adjusted EBITDA in the third quarter of 2014. The $16.7 million improvement is primarily related to achieved synergies.

Income Taxes

Our adjusted effective income tax rates, which exclude discontinued operations, special and non-operating pension and OPEB items, were 26.6% and 18.9% for the third quarter of 2015 and 2014, respectively. Our effective tax rate continues to be influenced by the level and geographic mix of income, and benefits from a favorable mix of income in lower tax jurisdictions. The effective tax rate increase compared to the prior year is primarily driven by the Rockwood acquisition, which caused a reduction in various benefits in our effective tax rate.

Cash Flow

Our cash flow from operations was approximately $316.9 million for the nine months ended September 30, 2015, down 26% versus the same period in 2014 primarily due to significant cash expenses in the current period related to the Rockwood acquisition, including acquisition fees, costs to deliver synergy projects, and tax payments to repatriate cash from overseas. We had $234.5 million in cash and cash equivalents at September 30, 2015 as compared to $2.5 billion at December 31, 2014. Cash on hand, cash provided by operations, a return of capital from an unconsolidated investment and proceeds from borrowings funded $2.1 billion for acquisitions, $164.6 million of capital expenditures for plant, machinery and equipment and dividends to shareholders of $86.8 million during the nine months ended September 30, 2015.

Outlook

The outlook for the full year results reflects continued strength in Lithium and Performance Catalyst Solutions, and on track results in Refining Solutions and Chemetall Surface Treatment. However, the outlook is impacted by a lower forecast for Fine Chemistry Services. Full year adjusted EBITDA is now expected to range from $940 million to $960 million; adjusted EPS is expected to be $3.65 to $3.80; adjusted free cash flow is expected to range from $475 million to $525 million.

About Albemarle

Albemarle Corporation, headquartered in Baton Rouge, Louisiana, is one of the premier specialty chemicals companies with positions in attractive end markets around the world. With a broad customer reach and diverse end markets, Albemarle develops, manufactures and markets technologically advanced and high value added products, including lithium and lithium compounds, bromine and bromine derivatives, catalysts and surface treatment chemistries used in a wide range of applications including consumer electronics, flame retardants, metal processing, plastics, contemporary and alternative transportation vehicles, refining, pharmaceuticals, agriculture, construction and custom chemistry services. Albemarle is focused on delivering differentiated, performance-based technologies that deliver innovative and sustainable solutions to its customers. The Company employs approximately 6,900 people and serves customers in approximately 100 countries.

Source: Albemarle
 

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