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[December 2007]
Ferro Reports 2007 Third-Quarter Results
Ferro Corporation (Cleveland, OH, USA) announced sales of US$551 million for the quarter ended 30 September 2007, up 10% from sales of US$501 million in the third quarter of 2006.
Income from continuing operations for Q3 2007 was US$5.6 million, up 2.2% compared with US$5.5 million in Q3 2006. During the quarter, lower selling, general and administrative expenses and lower interest expense were largely offset by restructuring charges related to the consolidation of certain manufacturing operations in Europe and higher income tax expense. The Q3 2007 income from continuing operations included net pre-tax expenses of US$6.5 million primarily related to restructuring costs. The Q3 2006 income from continuing operations included net pre-tax expenses of US$1.3 million primarily related to manufacturing rationalisation activities.
"We delivered strong third-quarter sales that were driven by the breadth of our international operations," said Chairman, President and CEO James Kirsch. "Our segment income increased 7 percent, compared with the third quarter of 2006, despite weakness in a number of U.S. markets and continued raw material cost increases. While we delivered improved segment income from the third quarter of 2006, we remain focused on the opportunities we have identified to improve overall profitability and deliver enhanced shareholder value."
Net sales increased in the third quarter primarily as a result of product price increases and favourable changes in foreign currency exchange rates. Compared with Q3 2006, sales increased in the Performance Coatings, Color and Glass Performance Materials, Electronic Materials and Polymer Additives segments. Sales declined from the prior-year period in the Specialty Plastics segment. International net sales grew 18% compared with Q3 2006, while sales in the USA were flat.
Gross margins were 18.2% of sales compared with 19.7% of sales in Q3 2006. The company's 2007 third quarter gross profit was reduced by US$0.5 million in costs primarily related to accelerated depreciation and other costs associated with manufacturing rationalisation activities. Gross profit was negatively impacted by lower volumes, particularly in porcelain enamel and plastics products, and higher raw material costs. In addition, gross margin as a percent of sales continued to be negatively impacted by rising precious metal costs. Precious metal costs are passed through to customers with minimal contribution to margins.
Selling, general and administrative (SG&A) expense was US$71.1 million in Q3 2007, or 12.9% of sales. SG&A expense in Q3 2006 was US$74.1 million, or 14.8% of sales, including charges of US$0.4 million primarily related to organisational initiatives and an accounting restatement. SG&A expense declined primarily as a result of expense reduction activities, particularly in the Specialty Plastics and Electronic Materials segments, lower incentive compensation accruals and lower audit fees.
Restructuring charges were US$5.8 million for the Q3 2007, primarily as a result of activities related to the consolidation of Ferro's porcelain enamel manufacturing operations in Europe. There were no restructuring charges recorded in the third quarter of 2006.
Sales in the company's Inorganic Specialties Group, which includes the Performance Coatings and Color and Glass Performance Materials segments, increased in all regions compared with the third quarter of 2006. Sales growth was strongest in Europe, continuing a trend from prior quarters.
Sales in the Electronic Materials segment increased as demand for the company's dielectric materials recovered from the reduced levels in the first half of 2007. Strong demand for conductive pastes used by customers manufacturing solar cells continued to drive sales growth in the segment.
Sales in the Organic Specialties Group, which includes the Polymer Additives, Specialty Plastics and Other businesses segments, increased slightly. Sales in Polymer Additives increased, driven primarily by increased product pricing. Sales in Specialty Plastics declined as a result of weak demand from U.S. customers in residential housing, automotive and appliance applications.
Ferro said it expected sales in the fourth quarter to match or exceed the sales of US$497 million achieved in the fourth quarter of 2006. Consistent with normal seasonality, sales are expected to decline sequentially from the third quarter of 2007. Sales for the fourth quarter, ending 31 December 2007, are expected to be in the range of US$500 million to US$525 million.
Net income per share in the fourth quarter is expected to be in the range of 7 to 12 cents per share, including approximately 8 cents per share for charges related to the company's manufacturing rationalisation activities. Ferro reported a net loss of 10 cents per share in the fourth quarter of 2006.
www.ferro.com
ENDS