Emulsion polymers and specialty chemicals provider OMNOVA Solutions, Inc. (OMN) on Tuesday reported that profit for the third quarter soared from last year as margins climbed on lower raw material and manufacturing costs, despite a 22.3% drop in quarterly sales. Earnings per share also significantly topped analysts' expectations. Further, the company noted that it expects to continue to generate significantly improved year-over-year earnings in the fourth quarter.
In a statement, chairman and chief executive officer, Kevin McMullen said, "Our improved third quarter performance reflects the impact from a number of positive ongoing actions being taken by the Company, including broad-based cost reductions now totaling more than $23 million for the year, effective raw material sourcing and commercialization of innovative new products. Our Performance Chemicals segment and Decorative Products Asian businesses led the Company's overall improvement."
The Fairlawn, Ohio-based company reported net income of $10.1 million or $0.23 per share for the third quarter, higher than $3.1 million or $0.07 per share in the prior-year quarter. The results for the latest quarter include restructuring and severance charges of $0.3 million and flood-related expenses of $0.6 million.
On average, three analysts polled by Thomson Reuters expected the company to report earnings of $0.11 per share for the third quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter dropped 22.3% to $186.1 million from $239.5 million in the same quarter last year, impacted by lower selling prices and weak market demand, partially offset by market share gains and penetration into new adjacent markets.
Performance Chemicals net sales declined 28.2% to $104.4 million from $145.5 million in the year-ago quarter. Decorative Products net sales decreased 13.1% to $81.7 million from $94.0 million in the third quarter of fiscal 2008.
Gross profit for the third quarter improved to $44.0 million from $39.1 million in the year-ago quarter, and gross margin percentage climbed 730 basis points to 23.6% from last year's 16.3%, due primarily to lower raw material and manufacturing costs.
For the nine-month period, the company reported net income of $15.1 million or $0.35 per share compared to a net loss of $3.0 million or $0.07 per share in the prior-year period. Sales for the year-to-date period declined to $507.6 million from $649.8 million in the same period last year.
"Entering our fourth quarter, overall market demand in Decorative Products appears to be bottoming. Volumes in Performance Chemicals are expected to be up year-over-year for the fourth quarter but down modestly on a sequential basis, as is typical, compared to the third quarter. Because of the initiatives we have taken and continue to take, the Company expects to continue to generate significantly improved year-over-year earnings in the fourth quarter," McMullen added.
OMN closed Tuesday's regular trading session at $5.10, up $0.06 or 1.19% on a volume of 0.33 million shares, lower than the three-month average volume of 0.69 million shares.
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