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Hexion Specialty Chemicals Reports Strong Third Quarter 2007 Results

Published on 2007-11-15. Author : SpecialChem

COLUMBUS, Ohio -- Hexion Specialty Chemicals, Inc. has reported its results for the third quarter ended September 30, 2007. Highlights for the third quarter of 2007 include:

  • Revenues of $1.43 billion in 2007 compared to $1.34 billion during the prior year period, an increase of 7 percent.
  • Operating income of $88 million for the third quarter of 2007 compared to $57 million during the prior year period, an increase of 54 percent. Operating income for the third quarter of 2007 benefited from improved operating performance, as well as decreased integration costs, compared to the similar year-ago period.
  • Net loss of $2 million for the 2007 quarter versus a net loss of $14 million in the third quarter of 2006.
  • Segment EBITDA (earnings before interest, taxes, depreciation and amortization) increased 20 percent to $162 million in third quarter 2007 compared to $135 million during the prior year period. (Note: Segment EBITDA is a non-GAAP financial measure and is defined and reconciled to Net Income later in this release).
  • Adjusted EBITDA was $706 million for the Last Twelve Month (LTM) period ended September 30, 2007. (Note: Adjusted EBITDA is a non-GAAP financial measure and is defined and reconciled to Net Income later in this release).

"We were pleased to achieve double-digit gains in Segment EBITDA for the fifth consecutive quarter, while our operating income increased by 54 percent in the third quarter of 2007 compared to the prior year period, on the strength of several specialty products within our Epoxy and Phenolic Resins segment, our oilfield technology products, and our European and Latin American forest products businesses," said Craig O. Morrison, Chairman, President and CEO. "We continue to offset the challenging North American market conditions in 2007 through our strategy of international diversification, synergy achievement, productivity initiatives and leveraging bolt-on acquisitions to better serve our global customers.

"In the near-term, we continue to take the necessary actions to offset price spikes in certain key raw materials. We have recently announced several price increases for select products focused on offsetting the volatility of input costs."

Hexion achieved $10 million in synergies in the third quarter of 2007 as the Company continued to realize its targeted cost saving as planned. As of September 30, 2007, Hexion has achieved $105 million in synergies from its full program targeting $175 million in savings.

As previously announced on July 12, 2007, Hexion entered into a definitive merger agreement with Huntsman Corporation (NYSE: HUN) in an all-cash transaction valued at approximately $10.6 billion, including assumed debt. As previously disclosed, Huntsman's stockholders approved the merger agreement with Hexion on October 16, 2007. The transaction is subject to various conditions, including expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Act, review by several foreign jurisdictions and other customary closing conditions.

"We are pleased that Huntsman's stockholders approved the merger, and we continue to work diligently to satisfy all closing conditions and complete the transaction as quickly as possible," Morrison said.

Hexion also announced on November 1, 2007 that it had completed the purchase of ARKEMA GmbH, which had 2006 revenues of approximately EUR 101 million. Terms of the agreement were not disclosed. Based in the Leuna industrial park in east central Germany, the ARKEMA German resins and formaldehyde business manufactures formaldehyde and formaldehyde-based resins including urea-formaldehyde, phenol-formaldehyde and melamine-based resins systems. These resins are used to manufacture engineered wood panels including oriented strandboard, particleboard and medium density fiberboard. The business also produces impregnation resins used to laminate decorative paper surfaces to wood products.

"We remain focused on serving an expanding list of leading global customers in the high-growth regions of Eastern Europe, Latin America and Asia Pacific through our broad portfolio of thermoset resins," Morrison said.

Nine months 2007 results

Sales for the first nine months of 2007 were $4.3 billion, an 11 percent increase compared to the first nine months of 2006. Acquisitions, net of a divestiture, added $186 million in incremental sales. Operating income for the first nine months of 2007 increased to $281 million, an increase of 24 percent, compared to $227 million in the first nine months of 2006, supported by flattening raw materials and favorable product mix. The company posted a net loss of $2 million for the first nine months of 2007 compared to a net loss of $54 million in the first nine months of 2006. Year-to-date 2007 net income was impacted by higher interest and tax expenses compared to the first nine months of 2006. Results from the first nine months of 2006 also included a $52 million loss on the extinguishment of debt and a $37 million net gain recognized from the Brazilian consumer divestiture.

About Hexion Specialty Chemicals

Based in Columbus, Ohio, Hexion Specialty Chemicals serves the global wood and industrial markets through a broad range of thermoset technologies, specialty products and technical support for customers in a diverse range of applications and industries. Hexion Specialty Chemicals is controlled by an affiliate of Apollo Management, L.P.

Forward Looking Statements

Certain statements in this press release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, the management of Hexion Specialty Chemicals, Inc. (which may be referred to as "Hexion," "we," "us," "our" or the "Company") may from time to time make oral forward-looking statements. Forward looking statements may be identified by the words "believe," "expect," "anticipate," "project," "plan," "estimate," "will" or "intend" or similar expressions. Forward-looking statements reflect our current views about future events and are based on currently available financial, economic and competitive data and on our current business plans. Actual results could vary materially depending on risks and uncertainties that may affect our markets, services, prices and other factors as discussed in our 2006 Annual Report on Form 10-K, and our other filings, with the Securities and Exchange Commission (SEC). Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: economic factors such as an interruption in the supply of or increased pricing of raw materials due to natural disasters, competitive factors such as pricing actions by our competitors that could affect our operating margins, and regulatory factors such as changes in governmental regulations involving our products that lead to environmental and legal matters as described in our 2006 Annual Report on Form 10-K, and our other filings, with the SEC.

Source: Hexion Specialty Chemicals


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