Cytec Earnigns Down 14% in Second Quarter
WEST PATERSON, N.J. - Cytec Industries Inc. (NYSE:CYT) announced today that net earnings for the second quarter of 1999 were $28 million or $0.63 per diluted share on sales of $359 million. This compares to net earnings of $35 million, or $0.73 per diluted share on sales of $366 million for the comparable period of 1998.
David Lilley, Chairman, President and Chief Executive Officer commented: "The Specialty Chemical and Material segments continued the positive trends seen in first quarter of 1999. Demand for our new products and new applications in our Specialty Chemical and Material segments remains encouraging and we continue to expand our geographical coverage particularly in Asia. However, selling prices and volumes remain weak in the Building Block Chemical segment while lower selling prices have negatively impacted results of our associated companies. Our drive for continuous improvement is evident in the margin improvements created by increased productivity in all areas of our business and we are determined to maintain this momentum."
Segment Results
Water and Industrial Process Chemicals sales increased 7% to $94 million and operating earnings increased over 30% to $12 million. The improved sales were in mining chemicals and water treatment chemicals while sales of paper chemicals were essentially flat. Selling volumes were up 9%, about 3% of this from the recent acquisitions of the Oreprep and Nottingham industrial minerals product lines. Selling prices were down approximately 2%. Operating earnings are up as a result of the leverage from the higher sales and reduced operating costs.
Performance Products sales increased 12% to $112 million and operating earnings increased over 20% to $15 million. Polymer additives and specialty resins had higher sales while surfactant and specialty monomers were essentially flat; all three had sales volume increases however. Overall, selling volumes were up 17% of which 9% is due to the acquisition of the remaining 50% of our former Dyno-Cytec joint venture in July of last year. Selling prices for the segment declined 5% from the prior year with decreases in all product lines.
Specialty Materials sales were $115 million, a decrease of 11% although operating earnings increased 8% to $23 million as we realize benefits from the manufacturing rationalization programs started late last year. Approximately $9 million of the sales decrease was due to the divestiture of the molding compounds product line while the acquisition of The American Materials & Technologies Corporation in the fourth quarter of last year added about $7 million to sales. Excluding the effect of acquisitions and divestitures, selling volumes were down 5% as a result of the expected reductions in demand in the commercial aerospace market. This is being offset somewhat by new product introductions, new applications and new qualifications for our products. Selling prices decreased 2% but this was offset by lower raw material costs.
Building Block Chemicals sales were $38 million, a 22% decrease. Operating earnings were $3 million compared to $11 million for the same quarter last year. Acrylonitrile margins remain low and we expect this to continue for the remainder of the year. Selling prices for acrylonitrile started to improve late in the quarter but costs for propylene, the key raw material for acrylonitrile, while down from the year ago period, increased during the quarter. The methanol plant was idle for the quarter as a result of the low selling prices and it is expected to remain down at least through August. We do not expect any significant improvement in methanol selling prices. Also, melamine and acrylamide selling prices started to trend downward in the quarter. For the segment overall, selling prices were down 17% and selling volumes declined 5%. Operationally, the Building Block facilities ran well in the quarter.
Associated Companies Results
Equity in earnings of associated companies was down $6 million primarily due to lower sales and earnings by Criterion Catalyst. Increased market capacity and difficult refining economic conditions affected operations at Criterion Catalyst. The result has been much lower selling prices and an adverse product mix for hydrotreating catalysts. CYRO Industries earnings were also down, primarily as a result of lower selling prices. Equity earnings were also down $1 million as a result of the purchase of the remaining 50% ownership in the Dyno-Cytec joint venture in July of last year.
Mr. Lilley commented further: "The tax rate reduction from 37% to 35% positively impacted earnings while the lower number of shares outstanding due to the Company's stock repurchase program favorably impacted earnings per share.
"We remain encouraged by the results of our Specialty Chemical segments and expect the trends seen in the first half to continue for the rest of 1999. The Specialty Materials segment has performed well in spite of lower U.S. demand and we expect the decline in commercial aerospace build rates to bring this segment's second half results about 5% to 10% below first half results. We do not see improvement in the markets for our Building Block chemicals for the remainder of 1999 although we continue to improve our manufacturing effectiveness.
"Concerning our equity companies, we expect second half results to be well below the prior year period. In the case of Criterion Catalyst, we have begun the process of reviewing all alternatives for this equity investment."
Mr. Lilley continued, "Concerning the outlook for the full year, we expect the strength of our Specialty Chemical and Material segments to continue and we no longer expect an upturn in market conditions for our Building Blocks Chemical segment. Also, the poor performance by Criterion Catalyst is having an adverse effect. Even with the difficult conditions in Building Blocks and Criterion Catalyst we are comfortable with the Analyst's full year consensus estimate as published by First Call of $2.56 per diluted share. However, it is unlikely that we will achieve our goal of a year on year increase in diluted earnings per share.
"We continue to focus our efforts to grow internationally, to further penetrate markets through new products and applications and to significantly improve our productivity. We are aligned with shareholders and will take the necessary steps to improve the value of their investment."
Six Month Results
Net earnings for the six months ended June 30, 1999 were $56 million or $1.26 per diluted common share on net sales of $714 million. This compares to net earnings of $66 million or $1.38 per diluted common share on net sales of $734 million.
Company Profile
Cytec Industries Inc. is a vertically integrated, specialty chemicals and materials company that focuses on value-added specialty products. The Company develops, manufactures and markets water and industrial process chemicals, performance products, specialty materials and building block chemicals to serve a broad group of end users, including the aerospace, plastics, coatings, mining, paper, water treatment and automotive industries.
Forward Looking and Cautionary Statements
Except for the historical information and discussions contained herein, statements contained in this release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. Achieving the results described in these statements involves a number of risks, uncertainties and other factors that could cause actual results to differ materially, as discussed in Cytec's filings with the Securities and Exchange Commission.