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[July 2006]
Ferro Announces Financial Results for First Quarter 2006
Ferro Corporation (Cleveland, OH, USA) has announced sales of US$505 million for the quarter ended 31 March 2006, a quarterly record. Sales were 9% higher than the prior-year quarter and up 10% from the fourth quarter of 2005. Net income from continuing operations was US$7.2 million, or US$0.16 per diluted share, compared with US$0.6 million, or less than US$0.01 per share, in the first quarter of 2005.
The record quarterly sales were driven by growth in Ferro's business segments, including Electronic Materials, Performance Coatings, Color and Glass Performance Materials, Polymer Additives and Specialty Plastics. Growth in Electronic Materials was 40% over the prior year when customers' inventory issues depressed sales. Volume and price/mix were positive for the quarter, while exchange rate changes relative to the prior-year quarter lowered the company's reported revenue growth rate by approximately 3 percentage points.
Included in the first quarter 2006 net income from continuing operations were certain items, some favourable and some unfavourable, which had a combined negative pre-tax effect of approximately US$6.2 million. These amounts included expense related to the accounting investigation, restatement and audit work for 2003 and 2004, a benefit plan curtailment charge and the positive effects from previously announced pension plan changes. These items reduced first quarter net income from continuing operations by US$0.09 per share. In the 2005 first quarter, charges reduced net income by US$0.11 per share.
The company also recognised a US$2.7 million non-cash, pre-tax loss in the first quarter resulting from mark-to-market forward supply contracts, mainly for natural gas. In the first quarter of 2005, the company recognised a mark-to-market gain of US$2.5 million from forward supply contracts. Mark-to-market charges will decline in the future as the company transitions to new forward supply contracts over the next several quarters.
"Current business conditions continue to provide a favorable environment for the Company's businesses," said President and CEO James Kirsch. "In general, our businesses are delivering increased volumes, pricing is improving and expense reduction efforts are progressing."
Improved first quarter demand in the Electronic Materials business was driven by continued strength among multilayer capacitor and solar cell customers. Increased volume and a more favourable price/mix contributed to the increased overall revenue of the segment, along with higher precious metal cost pass-throughs.
In the Performance Coatings segment, price increases implemented in late 2005 showed their full effect in the first quarter. Raw material costs, particularly for zinc, are increasing sharply and are challenging Ferro's ability to cover the increases through pricing alone. Color and Glass Performance Materials segment sales were positively impacted by a seasonal increase in construction spending and higher global auto production, as well as the effects of pricing changes made over the past year.
The Polymer Additives segment continues to reposition its product offerings. Ferro is generating increased sales in new additive segments, and is seeing good customer reception of new derivative product offerings. As a result, volumes have improved and there is a more diversified base of products from which to build future growth.
The Specialty Plastics segment is delivering improved profitability due to price increases, lower raw materials costs and improved expense control.
"I'm extremely proud of the achievements of the Ferro team worldwide over the past half year," said Kirsch. "We're creating a new Ferro, one that's fueled by committed people who bring great skill and a desire to win to the job every day. We now have a solid capital foundation, a strong and focused leadership team, and clear strategies and goals. The momentum of this organization is building, and I'm confident we can take Ferro to a new level of performance as we move forward."
www.ferro.com
ENDS