Cleaning products company Zep Inc. (ZEP), Thursday reported a swing to loss for the second-quarter ended February 28, 2009, reflecting weak demand amid the economic downturn.
The Atlanta, Georgia based company's second quarter net loss was $0.9 million or $0.04 per share, compared to net income of $1.9 million or $0.09 per share in the previous year.
Quarterly results included a facility consolidation restructuring charge of $1.1 million, while it was $0.5 million in the year-ago period.
On average, four analysts polled by Thomson Reuters expected the company to report loss of $0.08 per share for the second quarter. Analysts' estimate typically excludes special items.
Net sales for the quarter slid 13.9% to $114.6 million from $133.2 million in the same period last year.
Although selling prices in domestic market increased year-over-year by about $5.0 million, waning demand amid global slump resulted in volume-related sales drop of $19.3 million. Unfavorable foreign currency translation on overseas sales adversely impacted total net sales by $4.3 million compared with the year-ago period.
Gross profit margins for the quarter were 51.2%, compared to 55.9% in the similar quarter last year.
For the six-month period, net loss was $2.5 million or $0.12 per share, compared to net income of $8.2 million or $0.39 per share in the prior year. Net sales for the first half of 2009 slipped 11.9% to $243.8 million from $276.7 million last year.
Looking ahead, Zep expects capital expenditures to range from $8 million to $10 million in fiscal 2009.
John Morgan, Chief Executive of Zep said, "In addition to the previously announced $3.0 million in annualized fixed cost reductions, we have identified an additional $4.0 million in fixed cost reductions, and expect to begin fully realizing these savings in the first quarter of fiscal year 2010."
Morgan added, "We expect benefits of our raw material cost saving efforts to begin ramping up during the third fiscal quarter of this year until an annualized run rate of approximately $10 million to $11 million is attained in our first fiscal quarter of 2010. While we view these savings as a good start, they fall short of returning us to historical cost levels, and thus supplier negotiations continue."
Zep also revealed that after having culled under-performing sales representatives last year, the company has begun adding sales capacity by seeding its sales force with experienced professionals.
ZEP is currently trading at $12.10, up $1.75 or 16.91%,on the NYSE.
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