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Specialty earnings mixed despite sales increases

2:47 PM MDT | May 12, 2014 | CW Staff

Specialty earnings were mixed, since most companies report rising revenues, but one-time charges and bad winter weather took a bite out of earnings. Ecolab and FMC have matched estimates, although FMC’s agricultural chemicals business had a weak quarter because of the harsh winter in North America. Ashland reports a loss due to restructuring charges, but underlying earnings were flat year-on-year (YOY). PolyOne’s earnings rose because of the Spartech acquisition.

Ecolab reports net income up 20% YOY, to $191 million, on sales up 16%, to $3.34 billion. Adjusted earnings, excluding restructuring and other charges, rose 23% YOY, to $228.2 million, or 74 cts/share, matching analysts’ consensus estimate, as reported by Thomson Reuters (New York). “First-quarter results were in line with our expectations,” says Ecolab chairman and CEO Douglas Baker.

Ecolab expects full-year 2014 adjusted earnings to total $4.10–4.20/share, up 16–19% YOY, the company says. Analysts expect full-year earnings to total $4.18/share. For the second quarter, Ecolab is expecting earnings to total $1.00–1.04/share, up 16–21% YOY, while analysts expect the company’s earnings to total $1.03/share.

Ashland reports a net loss from continuing operations mostly due to a variety of charges, including restructuring charges and charges related to the divestiture of Ashland’s casting chemicals joint venture, while sales that were flat YOY. The charges totaled $181 million. Excluding the charges, adjusted income from continuing operations totaled $120 million, or $1.53/share, flat YOY and still short of analysts’ consensus estimate of $1.59/share.

"The benefits of our global restructuring should begin to ramp up as we move through the year. At the same time, we are encouraged by some of the positive trends we are seeing within our business, particularly as we head into the second half of the year, which is our seasonally stronger period," says Ashland chairman and CEO James O’Brien.

PolyOne’s first-quarter net income nearly doubled YOY, while adjusted earnings totaled 44 cts/share, up 42%. PolyOne's specialty segments, including the additives and inks and engineered materials businesses, led growth as the company benefitted from synergies related to the Spartech acquisition.

"With the acquisition of Spartech completed over one year ago, our integration efforts and previously announced manufacturing realignment are accelerating specialty platform growth. We are on pace to achieve our stated goal of generating 50 cts in adjusted earnings per share accretion from Spartech in 2015,” says PolyOne v.p. And COO Robert Patterson. PolyOne has reiterated its 2015 adjusted earnings target of $2.50/share.

FMC reports first-quarter net income down by about half YOY largely because of charges related to the divestiture of the company’s hydrogen peroxide business, which closed during the quarter. Excluding those charges, adjusted earnings totaled 95 cts/share, down 12% YOY and matching analysts’ consensus estimate. Bad weather weakend results in the company’s agricultural chemicals segment.

"Overall, our businesses performed as expected in the first quarter. Health and nutrition continues to experience demand growth in its core end markets that will be supplemented by growth in sales of omega-3 products. In [the minerals segment], both alkali chemicals and lithium are performing well and delivering on their targets for both volumes and price,” says FMC chairman and CEO Pierre Brondeau.

International Flavors & Fragrances’ (IFF) adjusted earnings, excluding some tax charges, rose 11% YOY, to $1.32/share, ahead of analysts’ consensus estimate of $1.25/share. “Our 7% local currency sales growth reflects balanced growth between our flavors and fragrances businesses and includes a percentage point of growth from our Aromor acquisition, completed in January,” says IFF chairman and CEO Doug Tough. IFF expects 5–7% revenue growth and double-digit growth in adjusted earnings for the full year, Tough adds.

Chemtura’s first-quarter adjusted earnings totaled $13 million, or 13 cts/share, down 24% YOY and short of analysts’ consensus estimate of 17 cts/share. The industrial engineered products segment, which includes bromine and organometallics, incurred a loss despite rising sales. The company was also hit by bad winter weather and unfavorable manufacturing variances, according to chairman and CEO Craig Rogerson.

Mix it up
(sales and net income in millions of dollars)
Company Sales % Change* Net Income % Change
Ecolab $3,340 16% $191 20%
Ashland 1,500 0 -61 NA
PolyOne 1,000 25 29 93
FMC 942 3 66 -50
IFF 770 6 107 18
Chemtura 556 5 10 NA
Stepan 477 5 13 -32
Rockwood 355 5 22 234
Koppers 331 -11 2 -80
Source: Company reports. *percent change from year-ago quarter

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