Wednesday, plastic compounds and resin maker A. Schulman, Inc. (SHLM), said its first-quarter profit rose sharply from a year ago on lower manufacturing costs and improved gross margins, even as sales slumped.
A. Schulman's first-quarter profit rose to $17.13 million or $0.65 per share from $8.33 million or $0.31 per share from the year-ago period, with a positive impact of $0.8 million on earnings from translation of foreign currency. For the quarter under review, A. Schulman incurred a one-time charge of $2.7 million, related to its proposed acquisition of polymer processing company ICO, Inc. (ICOC), while last year's first quarter results include an after-tax one-time restructuring charge of $0.5 million.
Excluding the charges, net income for the quarter increased to $19.7 million from $8.7 million in the prior-year period. Earnings per share rose to $0.76 from $0.33 reported a year ago.
Analysts polled by Thomson Reuters expected earnings of $0.43 per share for the first-quarter. Analysts' estimates typically exclude one-time items.
A. Schulman's first-quarter net sales declined 6.6% to $362.86 million from $388.31 million in the year-earlier quarter. Tonnage declined 4.5% due to the weak market, lower production capacity and efforts to move away from low-margin business in its engineered plastics business. Though the translation effect of foreign currency increased sales by 3.0%, unfavorable resin prices and mix and lower markets negatively impacted sales by 5.1% for the quarter. However, A. Schulman's cost of sales declined sharply to $299.70 million from $346.31 million from a year ago.
Sales in Europe for the quarter were $271.9 million, a decrease of 3.2%, compared with the prior-year period. North America earned a combined $2.9 million during the quarter, an impressive turnaround of $5.2 million from last year's first-quarter loss of $2.3 million. Sales in Asia were up almost 60% for the quarter compared with the same period last year as tonnage almost doubled.
Gross margin for the quarter improved 660 basis points and reached 17.4% compared to 10.8% in the prior-year quarter. Selling, general and administrative expenses increased to $40.8 million from $34.8 million.
Looking ahead, Joseph Gingo, Chairman, President and CEO, A. Schulman said, "Since the first quarter is typically stronger due to seasonal effects and because the effect of incentive programs may subside, we expect a sequential decline for the second quarter. Nevertheless, the Company expects that net income for the second quarter of fiscal 2010 will be significantly better than the prior-year period, which represented the worst months of the recession from our perspective."
SHLM closed Wednesday's trading at $21.26, down $0.02 or 0.09%, on a volume of 0.53 million shares. In after-market hours, the shares rose $0.99 or 4.66% to $22.25.
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