Ferro increases 2013 earnings guidance; estimates cumulative cost savings in 2014

First-quarter 2013 adjusted earnings per diluted share expected to be USD 0.05 to USD 0.07; 2013 adjusted earnings per diluted share guidance increased; cost savings initiatives now estimated to generate savings of USD 30 million in 2013, rising to USD 70 million in 2014; adjusted earnings per diluted share for 2015 expected to be in the range of USD 0.90 to USD 1.00.

Ferro Corporation has announced that adjusted earnings per share for the quarter ending 31 March 2013, are now expected to be in the range of USD 0.05 to USD 0.07, compared to the previously announced range of USD 0.02 to USD 0.05. Ferro also now anticipates adjusted earnings for the full-year ending 31 December 2013, to be USD 0.30 to USD 0.35 per share, compared to the previously announced range of USD 0.25 to USD 0.30. This guidance is based on preliminary first-quarter results and the progress made to date on the company’s cost-saving initiatives and value creation strategy. For 2015, the company now expects adjusted earnings per share of USD 0.90 to USD 1.00, compared to the previously announced range of USD 0.75 to USD 0.85.
As part of Ferro’s continuing cost-saving initiatives, the company announced that it has entered into a global shared services master agreement with Capgemini, one of the world’s foremost providers of technology and outsourcing services, to provide certain business process and information technology outsourcing services to Ferro. This agreement is the culmination of an intensive process that included proposals from multiple interested vendors and several stages of due diligence. Capgemini will enable Ferro, whose manufacturing footprint spans 26 countries, to move to a global shared services model, drive greater operational efficiencies, and create a scalable back-office operation.
As a result of this partnership and the progress made to date to streamline operations and to identify and realize cost-saving opportunities, the company is increasing its cumulative operating cost savings target by 40%. The company expects savings achieved in 2013 to be USD 30 million, at the upper end of the previously announced range, rising to USD 70 million in 2014.
“As we continue to successfully execute on our value creation strategy, and gain greater visibility into the outlook for our businesses, we have increased confidence in our ability to achieve cost savings while continuing to improve returns on invested capital and pursue high-return growth investments,” said Peter Thomas, Interim President and Chief Executive Officer of Ferro. “Business conditions in developing markets and order bookings for the second quarter for certain product offerings, including digital inks and glazes and renovation and automotive applications, are exceeding our initial expectations, countering weakness in Europe. In addition, we have made important progress in addressing non-core and underperforming assets with the sale of our solar pastes and pharmaceuticals businesses. We are confident that we will deliver against our cost-saving initiatives, and we continue to identify opportunities for further cost and operational efficiencies.”
Thomas added, “The Ferro team has done an excellent job of realigning operations and making the difficult but necessary decisions to eliminate costs where appropriate. We are pleased with our progress to date and the resulting expectations for increased earnings and cost savings. The USD 20 million increase in the cost savings target for 2014, coupled with improving business conditions and reduced exposure to underperforming or non-core assets, further reinforces our view that continued execution against the value creation strategy will deliver increased cash flows, more consistent earnings, and higher shareholder value. Ferro’s Board and management team are committed to maintaining the momentum of our progress and will be relentless in our efforts to drive value for Ferro shareholders.”
Based on current market conditions, including persistent weakness in European macroeconomic conditions, coupled with the expected timing associated with the cost savings programmes, the company continues to expect the first quarter of 2013 will be the lowest earnings quarter of the year, in the range of USD 0.05 to USD 0.07 per share, which reflects the exit from the solar pastes and pharmaceutical businesses.
The company’s expected 2013 earnings per diluted share of USD 0.30 to USD 0.35 also reflects the exit from the solar pastes and pharmaceutical businesses and the expected USD 30 million of cost savings. The expected improvements in the company’s cost structure will be partially offset by inflation and the normalization of incentive compensation.
Ferro Corporation is a leading global supplier of technology-based performance materials and chemicals for manufacturers. Ferro products are sold into the building and construction, automotive, appliances, electronics, household furnishings, and industrial products markets. Headquartered in Mayfield Heights, Ohio, the company has approximately 4,700 employees globally and reported 2012 sales of USD 1.8 billion.