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The improvement was primarily the result of higher sales volume. Increased restructuring charges, higher selling, general and administrative expense, and increased income tax expense partially offset the benefits of the higher sales volume. In the 2010 second quarter, the operating results included net pre-tax charges of $26.6 million. These charges included restructuring charges of $21.2 million, partially offset by a net pre-tax gain of $7.8 million resulting from a business combination.
“Our excellent second quarter results demonstrate the progress we have made to reduce costs and grow our global business,” said James F. Kirsch, chairman, president and CEO. “The operating leverage that we have created through our manufacturing rationalization programs 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.”
In addition, the company has signed an agreement to purchase a newly constructed manufacturing plant for frits and glazes in Fayoum, Egypt. The acquisition will allow Ferro to cost-effectively serve the growing tile manufacturing market in Egypt, the Middle East and North Africa. The closing of the transaction is subject to governmental approvals and the satisfaction or waiver of other customary closing conditions. Closing is expected in the 2010 third quarter.
Customer demand is expected to follow historical seasonal trends during 2010, with higher sales and profitability in the first half of the year compared with the second half. Reductions in the company’s cost structure that were accomplished in 2009 are expected to provide improved profitability in 2010. In addition, the company continues to execute additional manufacturing rationalization and expense reduction initiatives during 2010, including plant closings and staffing reductions.
Ferro’s current outlook for 2010 assumes that worldwide real GDP growth will recover to greater than 2% and that there will not be a return to recessionary conditions in the its major regional markets in the U.S., Europe, and Asia.
Based on these assumptions and the first half results, the company has increased its estimates for 2010 financial performance. Ferro currently estimates full-year 2010 net sales will increase 15-20% compared with 2009, to between $1.9 billion and $2.0 billion. Adjusted EBITDA is expected to be in the range of $240 million to $255 million in 2010, compared with a previous outlook of $190 million to $210 million.
For more information, visit www.ferro.com.