Tuesday, specialty chemicals and materials company Cytec Industries Inc. (CYT) said it expects a modest loss for the second quarter before special items, and also lowered fiscal 2009 adjusted earnings per share forecast sharply, citing continued deterioration in market demand. The company added that it is on track with cost reduction efforts, which would increasingly benefit its Coating Resins product lines in the second half.
On average, seven analysts polled by Thomson Reuters expect the company to report earnings of $0.27 per share for the second quarter, with estimates ranging between $0.20 and $0.33 per share. Analysts' estimates typically exclude special items.
In the prior year's second quarter, Cytec had generated net earnings of $56.5 million or $1.16 per share, and adjusted net earnings of $58.5 million or $1.20 per share.
Further, the Woodland Park, New Jersey-based company said it currently projects full-year earnings per share after adjusting for special items in a range of $0.60 to $0.90 per share, lower than previous forecast of $1.35 to $1.75 per share. Wall Street analysts expect the company to report earnings of $1.26 per share for the year, with estimates ranging between $1.00 and $1.48 per share.
In the fiscal year 2008, the company had recorded a net loss of $198.8 million or $4.16 per basic share, while adjusted net earnings were $167.2 million or $3.46 per diluted share.
Cytec Industries will provide its detailed full-year guidance at the time of second-quarter results announcement, scheduled on July 16, 2009.
Commenting on the forecast revision, Chairman and Chief Executive Officer Shane Fleming stated, "We are continuing to see lower demand in Engineered Materials, resulting from inventory destocking by parts manufacturers for large commercial aircraft as well as a sharper than expected slowdown in production rates related to business and regional jets. In response to these deteriorating market conditions, we are taking aggressive actions to realign our cost base."
Fleming added, "While we are responding to the new market demand in the base business, we continue to selectively invest in future growth programs and to be prepared when new large commercial aircraft platforms and the Joint Strike Fighter come into large scale production. The secular trend of higher composite usage remains intact, and we are working with a number of customers on near and long term opportunities."
Cytec Industries pointed that in Building Block Chemicals, it is experiencing weak demand in end markets for melamine products due to the general economic environment, and are expecting margin pressure in acrylonitrile due to cost increases in propylene.
The company added that it is on track with its cost reduction efforts which are expected to increasingly benefit the company's Coating Resins product lines in the second half of this year. The company is seeing sequential sales volume improvement, even though weak demand continues to challenge the Coating Resins products in the current quarter. The company noted that the remaining segments performance within Specialty Chemicals continues essentially as expected.
David Drillock, Vice President and Chief Financial Officer, said, "The continuing weak demand in Coating Resins plus the recent demand slowdown mentioned earlier in Engineered Materials lead us to expect a modest loss for the second quarter before special items, and to decrease our full year earnings per share outlook. We are making significant progress in the areas within our control, such as the structural cost improvement programs and working capital. I am particularly pleased with our success in the working capital initiative, which has generated improved cash flow ahead of schedule and has accelerated our debt pay down."
CYT closed Monday's regular trading session at $18.10, down $1.28, on a volume of 377 thousand shares.
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