Specialty earnings solid across various end markets
10:52 AM MDT | April 25, 2014 | —CW Staff
Specialty chemical earnings have mostly beat estimates on volume gains. Bad weather hurt W.R. Grace’s results, although the company beat analysts’ expectations. 3M’s chemicals business had solid results, Cytec’s earnings met management’s expectations, and Ferro’s earnings rose on improved margins.
Grace says extreme weather during the first quarter stifled North American construction activity and caused manufacturing closures at a Maryland refinery catalysts production site, which contributed to a year-on-year (YOY) drop in profits ( table).
“All three businesses grew sales in the quarter,” says Fred Festa, Grace's chairman and CEO. “Catalysts grew with new products and the polypropylene acquisition, which more than offset lower demand in Europe. Materials grew with strong demand in engineered materials, and construction products experienced strong growth, except in North America, where severe weather reduced construction activity in the quarter.”
Cytec reports first-quarter adjusted earnings that totaled $1.42/share, beating analysts’ consensus estimate of $1.33/share, as reported by Thomson Reuters (New York).
“Sales growth was driven by the in-process separation, aerospace materials, and industrial materials segments. We experienced operational challenges in aerospace materials that resulted in an earnings decline versus the prior year despite the revenue growth in that segment. The earnings in aerospace and in-process separation were also impacted by the sale of higher-cost inventory from the fourth quarter of 2013, when we lowered production to reduce inventory levels,” says Cytec chairman and CEO Shane Fleming. Cytec also raised its full-year earnings guidance by about 1.8% at the midpoint, to $5.60–6.00/share, because of a tax benefit that will carry forward into this year. Analysts expect Cytec’s full-year 2014 earnings to total $5.72/share.
Ferro’s adjusted earnings totaled 19 cts/share, nearly double the year-ago quarter’s earnings, which were hit by a loss from discontinued operations. Adjusted earnings beat analysts’ consensus estimate of 15 cts/share. Sales fell 6.2% YOY but were flat when excluding exited businesses and precious metals sales.
“Despite the strong start to the year, we continue to face business challenges, including reduced demand in the polymer additives and the pigments, powders, and oxides segments; competitive pricing pressure in key product lines; political instability in certain geographies; and reduced macroeconomic growth prospects in some regions, including China. Based on our first-quarter performance, cost savings efforts, and current sales trends, we expect adjusted earnings per share for 2014 to be in the range of 68 cts to 73 cts, up from previous guidance of 65–70 cts,” says Ferro president and CEO Peter Thomas.
The sales of 3M’s industrials segment, which includes chemicals, rose 3.1% YOY, to $2.8 billion, while operating income increased 6.7%, to $618 million. Sales rose for the purification, advanced materials, abrasives, transportation, and aerospace businesses but declined in the personal-care business.
“Our teams delivered positive organic growth in all business groups and geographic areas, we posted strong margins across the portfolio, and we returned a record amount of cash to shareholders,” says Inge Thulin, chairman and CEO of 3M.
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