Ferro Corporation has announced net sales of USD 543 million for the three months ended 30 June 2010, an increase of 36% from net sales of USD 399 million in the second quarter of 2009.
Income from c…
Ferro Corporation has announced net sales of USD 543 million for the three months ended 30 June 2010, an increase of 36% from net sales of USD 399 million in the second quarter of 2009. Income from continuing operations for the second quarter of 2010 was USD 7.6 million, or USD 0.08 for in the second quarter of 2009, an improvement primarily resulting from higher sales volume. The higher sales volume was partially offset by increased restructuring charges, higher selling, general and administrative expense and increased income tax. Operating results in the 2010 second quarter included net pre-tax charges of USD 26.6 million, which included restructuring charges of USD 21.2 million partially offset by a net pre-tax gain of USD 7.8 million resulting from a business combination. Other pre-tax charges of USD 13.2 million were recorded during the second quarter, mainly related to manufacturing rationalization and other expense reduction activities, as well as an increased environmental reserve. Loss from continuing operations included net pre-tax charges of USD 6.4 million primarily related to manufacturing rationalization and other cost-reduction actions. “Our excellent second-quarter results demonstrate the progress we have made to reduce costs and grow our global business,” said chairman, president and CEO James F. Kirsch. “The operating leverage that we have created through our manufacturing rationalization programmes is delivering strong improvements in profitability. I am extremely proud of the achievements of Ferro employees around the world as they continue to demonstrate their commitment to winning. The Ferro organization is ready to pursue further opportunities for future growth.” Net sales were up 36% compared to the same period in 2009 as client demand continued to recover from the global economic downturn. During the second quarter of 2010, demand continued with growth that began in the second quarter of 2009. Increased sales volume contributed 30 percentage points to the growth in sales compared with the 2009 second quarter, while changes in product mix and price contributed 8 percentage points of sales growth. Sales growth was reduced by approximately 2 percentage points due to changes in foreign currency exchange rates. Increased sales of precious metals, as well as changes in both price and volume, accounted for about 10 percentage points of the overall sales increase compared with the prior-year period. Gross profit percentage increased to 22.5% of net sales, compared with 16.3% of net sales in the same quarter of 2009, a result of higher sales volume, cost reductions achieved through restructuring initiatives and reduced staffing and benefits from changes in product pricing and mix. During the quarter, gross profit was reduced by USD 2.5 million due to charges mainly for accelerated depreciation and other costs related to manufacturing rationalization programmes. Selling, general and administrative (“SG&A”) expense was up USD 7.4 million compared with the second quarter of 2009. SG&A expense declined to 12.9% of sales in the 2010 second quarter compared with 15.6% in the same period of 2009. Charges of USD 5.6 million, including severance and other costs related to manufacturing rationalization initiatives and corporate development expenses, were included in SG&A expense during the 2010 second quarter. SG&A expense in the second quarter of 2009 included USD 3.0 million in charges, mainly due to expense reduction actions and manufacturing rationalization related charges. All segments saw income increased except pharmaceuticals. Restructuring charges, which saw employee severance charges, related to initiatives to close a manufacturing plant in France and two in the Netherlands as primary drivers, increased to USD 21 million in the second quarter of 2010. Interest expense dropped to USD 14 million from USD 17 million with primary driver of the decline in interest expense was a decline in average borrowing levels compared with the prior-year quarter. Lower average interest rates also contributed to decreased interest expense. A non-cash write-off of USD 1.5 million in unamortized fees related to a USD 50 million pay down of the company“s term loan debt was also included in the second quarter interest expense. Total debt on 30 June 2010 totalled USD 353 million, down USD 71 million compared to the figure of 31 December 2009. Moreover, the company had net proceeds of USD 2.6 million from international receivables factoring programmes at the end of the 2010 second quarter. Net proceeds from international receivables factoring on 31 December 2009 were USD 10.3 million. Cash deposits related to precious metals during the second quarter dropped to USD 56 million from USD 107 million, mainly due to a result of reduced collateral requirements from participants in the company“s precious metal leasing programme. Ferro has signed an agreement to acquire a newly constructed manufacturing plant for frits and glazes in Fayoum, Egypt, closing of which is subject to governmental approvals and the satisfaction or waiver of other customary closing conditions, expected in the 2010 third quarter. Customer demand is expected to follow historical seasonal trends during 2010, and company outlook for 2010 assumes that real worldwide GDP growth will recover to more than 2% and that there will not be a return to recessionary conditions in the company“s major regional markets in the US, Europe and Asia. Based on these assumptions and first half results, Ferro has increased its estimates for its 2010 financial performance and currently estimates full-year 2010 net sales to increase 15-20% compared to 2009, at USD 1.9-2.0 billion. Adjusted EBITDA is expected to reach USD 240-255 million in 2010, up from the previous outlook of USD 190-210 million. Sales and adjusted EBITDA are both expected to be higher in the first half of 2010 than the second half of the year, in line with Ferro“s normal seasonal trends. The company expects to update its annual sales and adjusted EBITDA estimates in its third quarter earnings release to reflect regional economic conditions, progress on manufacturing rationalization programmes, and updated customer demand forecasts.