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Cytec Industries Inc. (CYT)
Q3 2010 Earnings Call Transcript
October 22, 2010 11:00 am ET
Jodi Allen – IR
Shane Fleming – Chairman, President and CEO
Dave Drillock – VP and CFO
John McNulty – Credit Suisse
David Begleiter – Deutsche Bank
P.J. Juvekar – Citi
Mike Sison – KeyBanc
Laurence Alexander – Jefferies
Robert Koort – Goldman Sachs
Benjamin Jacobs [ph] – Viking Global Investors
Previous Statements by CYT
» Cytec Industries Inc. Q2 2010 Earnings Call Transcript
» Cytec Industries Inc. Q1 2010 Earnings Call Transcript
» Cytec Industries Inc. Q4 2009 Earnings Call Transcript
Thank you, Jessica and good morning, everyone. We appreciate your participation in our conference call. For our call today, Shane Fleming, Chairman, President and Chief Executive Officer will provide an overview of operations and Dave Drillock, Vice President and Chief Financial Officer will review the financial results and the special items noted in our press release. Shane will then finish with some commentary on our outlook for 2010.
This call is being webcast in listen-only mode, and it will be archived in audio format on our Web site for three weeks. Throughout the call, we will be referencing the supporting materials, which can be downloaded from our Investor Relations Web site under Calendar of Events, or you may follow the slides accompanying today’s webcast, which are also available through our Web site.
During the course of this presentation and in responses to your questions, you will hear certain forward-looking statements. Our actual results may differ materially. Please read our commentary on forward-looking statements in slide # two of our supporting materials or at the end of our news release or the statements in our quarterly and annual SEC filings.
In addition, our discussion includes certain non-GAAP financial measurements as defined under SEC rules. We have provided a reconciliation of those non-GAAP financial measures to the most directly comparable GAAP measure at the end of our press release. A copy of our press release is available on our Investor Relations Web site.
Now, let me turn over the call over to Shane.
Thank you, Jodi and good morning, everyone. I appreciate you joining our earnings call. Beginning on slide # three, our results in the quarter reflects sales volume growth in each of our business segments versus the prior year period with demand improvement across all regions.
Overall, sales in the third quarter were $837 million, a 13% versus the prior year quarter. The stronger sales volume increase was in our Engineered Materials segment as we continue to experience demand improvement in the commercial aerospace market.
The overall results for the quarter was net earnings of almost $40 million or $0.80 per diluted share, excluding the special item that Dave will speak to and in line with our full year estimates for 2010.
I am very encouraged by the adjusted EPS growth of 40% versus the third quarter 2009 EPS of $0.57 per diluted share. These results demonstrate our improved earnings leverage as a result of the structural cost saving actions taken last year.
Yet, as anticipated, we also experienced some additional cost pressures related to higher raw material costs impacting the Coating Resins business as well as a planned increase in operating costs in Engineered Materials.
Now I’ll go on in a bit more detail on the business segment results, beginning on slide # four. Coating Resins delivered sales of $364 million, an 8% increase versus the third quarter of 2009.
Selling volumes were up by 4% versus the prior year quarter, with the strongest growth in Europe. We did, for the first time this year, see volume softness in Asia Pacific, although this was in part due to our actions to push price in the face of increasing raw material costs.
Selling prices increased by 9% versus the same period last year, related to the higher raw material costs and the impact of exchange rates decreased sales by 5%.
The chart on slide # five, displays revenue growth in the segment, which shows sequential sales approximately flat from last quarter. As we anticipated, the Coating Resins segment did experience some margin pressure as a result of the benefits in higher prices that we achieved in the second quarter ahead of raw material costs. We are now feeling the full impact of the higher raw material costs, which were up $35 million in the quarter against $30 million of increased selling price.
This led to sequential margin compression in the segment, although operating earnings of $19.5 million in the quarter were up 5% versus earnings of $18.5 million in the third quarter of last year.
We continue to act as market leaders, raising prices in response to rising raw materials. However, the environment has become more competitive in certain product lines, where capacity exceeds the market requirements, due to continued reduced demand and we’ve given up some volume as we continue to push price to cover increasing raw material costs.
Moving to Additive Technologies, slide # six shows sales in the segment of $66 million, an increase of 2% versus the third quarter 2009. Similar to Coatings, the Additives sales growth was particularly strong in Europe in the quarter. Selling prices increased 2% offset by exchange rates which decreased sales by 2%.
As a reminder, we divested our polyurethane product line in 2009. Excluding the impact from the divested business, sales were up by 11% in the segment.