Momentive Specialty Chemicals 2010 results: revenues rise to $4.8B in 2010

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Momentive Specialty Chemicals 2010 results: revenues rise to $4.8B in 2010

February 25, 2011 - 02:51
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COLUMBUS, OH, Feb. 25, 2011 (Business Wire) -Momentive Specialty Chemicals Inc. ("Momentive Specialty Chemicals" or the "Company"), formerly known as Hexion Specialty Chemicals, Inc., today announced results for the fourth quarter and year ended December 31, 2010. Results for the fourth quarter of 2010 include:
  • Revenues of $1.2 billion in the fourth quarter of 2010 compared to $1.0 billion during the prior year period as sales continued to increase primarily due to volume gains and pricing actions including the contractual pass through of higher raw material costs.

  • Operating income of $159 million for the fourth quarter of 2010 compared to operating income of $36 million for the prior year period. Fourth quarter 2010 operating income improved compared to the prior year due to higher revenues and an improved cost structure resulting from the Company's ongoing productivity program. Fourth quarter 2010 also included $80 million in terminated merger and settlement income compared to $1 million in the fourth quarter of 2009.

  • Net income of $53 million for the fourth quarter of 2010 versus net loss of $(6) million in the prior year period. Fourth quarter 2010 results reflected the same factors impacting operating income.

  • Segment EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $142 million in the fourth quarter of 2010 compared to $102 million during the prior year period. (Note: Segment EBITDA is a non-GAAP financial measure and is defined and reconciled to Net Income (Loss) later in this release.)

Fiscal year 2010 results include:

  • Revenues of $4.82 billion in 2010 compared to $3.75 billion in 2009, with higher volumes accounting for $588 million of the increase, the contractual pass through of raw material driven price increases positively impacted sales by $490 million and unfavorable foreign currency translation of $11 million.

  • Operating income of $544 million in 2010 versus operating income of $133 million for the prior year period. Full-year 2010 results primarily reflected the improvement in its gross profit as a percentage of net sales, which increased to 15% in 2010 compared to 13 percent in 2009, due to improved volumes, pricing initiatives, favorable product mix, and productivity initiatives. 2010 operating income also included $171 million in terminated merger and settlement income compared to $62 million in 2009.

  • Net income of $214 million in 2010 versus net income of $114 million in the prior year period. 2010 results reflected the same factors impacting operating income. The Company's 2009 results also included a $224 million gain on the extinguishment of $298 million in face value of outstanding debt securities.

  • Segment EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $609 million in 2010 compared to $373 million during the prior year period. In addition, the Company reported Adjusted EBITDA for the last twelve months of $698 million, including in-process savings of approximately $50 million that the Company expects to achieve in connection with the shared services agreement that it entered into with Momentive Performance Materials Inc. ("MPM"). (Note: Segment EBITDA and Adjusted EBITDA are non-GAAP financial measures and are defined and reconciled to Net Income (Loss) later in this release.)

"With strong top line and segment EBITDA growth in the fourth quarter of 2010 compared to the prior year, we continue to demonstrate significant operating leverage from our comprehensive cost control initiatives," said Craig O. Morrison, Chairman, President and CEO. "While we experienced the normal seasonality that we anticipated in the fourth quarter of 2010, we also continued to benefit from tight market conditions that positively impacted our base epoxy resins and acrylic monomers versus the prior year period. We also posted solid quarterly gains in our oilfield proppants, VersaticTMAcids and Derivatives and international forest products businesses. Our overall fourth quarter 2010 results, however, were negatively impacted by inflation for key raw materials, which negatively impacted our segment EBITDA margins on a sequential basis compared to the third quarter of 2010. We're continuing to pursue a number of pricing actions to offset these raw material trends. We also took steps to optimize our portfolio through the recent divestiture of our Inks and Adhesive Resins business. In the fourth quarter of 2010, we also completed actions under the shared services agreement that will generate annual run-rate savings of $13 million. The timing of implementation of these actions was better than our initial estimates, and the savings will be allocated amongst MSC and MPM as per the agreement."

"Our record 2010 Segment EBITDA of $609 million surpassed the $594 million we posted in 2007 and reflected strong demand for our specialty products, continued growth in international markets and our productivity initiatives. Finally, we were pleased to enter into the shared services agreement with Momentive Performance Materials Inc. in connection with the transactions that formed Momentive Performance Materials Holdings LLC in October 2010. We believe that through our relationship with Momentive Performance Materials Inc. we can significantly improve our cost structure and accelerate our growth."

Segment Results

Following are net sales and Segment EBITDA by reportable segment for the fourth quarter and twelve months ended December 31, 2010. Segment EBITDA is defined as EBITDA adjusted to exclude certain non-cash and non-recurring expenses. Segment EBITDA is the primary performance measure used by the Company to evaluate operating results and allocate resources among segments. Segment EBITDA is also the profitability measure used in management and executive incentive compensation programs. Corporate and Other primarily represents certain corporate, general and administrative expenses that are not allocated to the segments. (Note: Segment EBITDA is defined and reconciled to Net Income (loss) later in this release.)

Inks and Adhesive Resins Transaction

On January 31, 2011, Momentive Specialty Chemicals Inc. announced that it had completed the sale of its global Ink & Adhesive Resins (IAR) business to Harima Chemicals, Inc. for a net purchase price of $120 million. The IAR business had 2010 annual revenues of approximately $356 million and is one of the world's leading suppliers of resins and additives to the graphics arts, adhesives, aroma chemical, synthetic rubber and specialty coating industries. Harima's purchase included the complete business including 11 manufacturing facilities on five continents and the IAR global product portfolio. The IAR business was previously reported within the Company's Coatings and Inks segment and is reported as a discontinued operation for the year ended December 31, 2010 and all prior periods presented. Thus, the Company has not included the earnings from this business in Segment or Adjusted EBITDA figures presented herein.

Outlook

"We believe we enter 2011 with encouraging demand trends and look to build on our 2010 performance through a combination of cost control initiatives, pricing actions, and continued international expansion through the completion of our two Asia Pacific sites currently under construction," Morrison said. "We anticipate continued strength in volumes for specialty applications, such as specialty epoxy resins, our oilfield proppants and VersaticTMAcids and Derivatives in 2011. We anticipate taking many of the actions in the coming year required to realize the anticipated synergies from the shared services agreement with Momentive Performance Materials Inc."