Additives maker The Lubrizol Corp. (LZ) reported a swing to fourth-quarter profit on Thursday, as revenues rose 9% compared to the prior-year quarter that was weighed down by heavy restructuring charges. The company also provided earnings guidance for fiscal 2010, higher than the current estimates of Wall Street analysts.
The Wickliffe, Ohio-based company reported a fourth-quarter net income of $134.2 million or $1.92 per share, compared to a net loss of $281.0 million or $4.16 per share a year ago.
Fourth quarter results included after-tax restructuring and impairment charges of $2 million or $0.03 per share, compared to after-tax restructuring and impairment charges of $330 million or $4.86 per share, and an after-tax write-off of acquired in-process research and development of $1 million or $.01 per share.
Excluding the special charges, adjusted earnings for the fourth quarter increased to $136 million or $1.95 per share from $50 million or $0.74 per share in the fourth quarter of 2008. On average, seven analysts polled by Thomson Reuters estimated earnings of $1.77 per share for the quarter. Analysts' estimates typically exclude special items.
Adjusted earnings increased largely due to margin management, increased volume, a lower effective tax rate, cost savings initiatives that lowered selling, technical, administrative and research expenses, and contributions from the 2008 acquisitions. These positive factors impacting earnings more than offset higher performance-based compensation expense, manufacturing costs, and net interest expense, Lubrizol said.
Revenues for the fourth quarter increased 9% to $1.19 billion from $1.09 billion for the fourth quarter of 2008. Analysts expected revenues of $1.16 billion for the quarter.
Lubrizol attributed the year-over-year increase in revenues to higher volume and favorable currency that more than offset a decline in the combination of price and product mix. Revenue growth was also due to incremental impact from acquisitions completed at the end of 2008, which contributed 2% to consolidated revenues in the fourth quarter of 2009.
James Hambrick, chief executive officer of Lubrizol, said, "The strong performance of both operating segments enabled us to post the third best quarterly results in our history. Additives continued to sustain the strong performance they established earlier in the year. Advanced Materials benefited from strong volume increases and success in delivering valuable technology to our customers while continuing to control costs and spending. And with their strong finish to the year, both segments delivered record operating income in 2009."
Segment wise, revenue from Lubrizol Additives division increased to $838.8 million from $789.3 million while revenue from Lubrizol Advanced Materials division rose to $349.5 million from $298.3 million a year ago.
The company reported a gross profit of $387.0 million for the fourth quarter, compared to a gross profit of $238.5 million in the similar quarter last year.
Lubrizol had an income before income taxes of $189.8 million, compared to a loss before income taxes of $296.6 million. This was mainly on restructuring and impairment charges of $3.1 million in the fourth quarter, compared to $368.9 million in the prior-year quarter.
For fiscal 2009, the company reported a net income of $501 million or $7.26 per share, compared to a net loss of $66 million or $0.97 per share in the similar period of 2008. Revenue for the period decreased 9% to $4.59 billion from $5.03 billion in the year-earlier period.
Lubrizol said it plans to break ground at its Zhuhai Gaolan site in South China in late 2010. The wholly owned manufacturing facility being built at the Zhuhai Gaolan Port Economic Zone is part of a 10-year plan by the company to increase global capacity in additives, and requires an investment in excess of $200 million over the next three years.
Looking ahead to full year 2010, Lubrizol is targeting earnings per share in the range of $7.63 to $8.23. On an adjusted basis, the company projects earnings in the range of $7.70 to $8.30 per share. Adjusted earnings outlook excludes restructuring charges of $0.07 per share related to the closing of a Canadian additives blending facility and facility closures announced in the third quarter of 2009. Analysts currently expect the company to report earnings of $7.31 per share for full year 2010.
Regarding the earnings outlook, Hambrick said, "The economic resiliency of our product lines was proven in 2009. And while we are not expecting sharp recoveries in 2010 for some of our end-use markets, such as construction, we project a volume increase this year due to emerging market growth, continued inventory replenishment and the recovery of some deferred demand. I expect the Additives business to sustain its current level of performance and for the Advanced Materials business to continue to demonstrate steady improvement."
LZ closed Thursday's regular trading at $73.57, down $0.71 or 0.96%, on a volume of 2.03 million shares on the New York Stock Exchange.
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