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“Our improved cost structure continues to deliver enhanced operating leverage, as shown by our strong first quarter results,” said James F. Kirsch, chairman, president and CEO. “We are engaged in additional restructuring activities around the world that we are confident will further improve our cost structure and competitive position. At the same time, we are extending the reach of our leading product franchises through focused new product development and regional expansion in order to drive future sales growth.”
Net sales increased 38% as demand partially recovered from the levels experienced in the first quarter of 2009, when customers were destocking due to the worldwide economic downturn. In the first quarter of 2010, demand continued in a pattern of sequential growth that began in the second quarter of 2009. Compared to the first three months of 2009, increased sales volume contributed 23 percentage points to the growth in sales; changes in product mix and price contributed 12 percentage points of sales growth; and changes in foreign currency exchange rates contributed an additional 3 percentage points to the sales increase. Increased sales of precious metals, including changes in both price and volume, accounted for approximately 12 percentage points of the overall sales increase compared with the prior-year period.
Income increased in all segments compared with the prior-year period. Segment income increased in Electronic Materials due to strong demand for conductive pastes and powders, particularly silver and aluminum pastes used by manufacturers of solar cells. Segment income in Performance Coatings and Color and Glass Performance Materials improved due to higher sales volumes and reduced costs. Cost reduction initiatives included manufacturing restructuring programs undertaken during 2009, including the closing of a plant in Nules, Spain, and staffing reductions. Restructuring programs currently underway in France and Portugal are expected to further reduce costs in the Color and Glass Performance Materials operations. Segment income also increased in Polymer Additives and Specialty Plastics due to a combination of higher sales volumes and reduced manufacturing costs.
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. Customer demand is expected to follow historical seasonal trends during 2010, with somewhat higher sales in the first half of the year compared with the second half.
The company’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 company’s major regional markets in the U.S., Europe and Asia. Based on these assumptions and the 2010 first quarter results, the company currently estimates full-year 2010 net sales will increase between 10 and 15% compared with 2009, to between $1.85 billion and $1.95 billion. Adjusted EBITDA is expected to be in the range of $190 million to $210 million in 2010. Both sales and adjusted EBITDA are expected to be higher in the first half of 2010 than the second half of the year, consistent with the company's normal seasonal trends.
Additional details are available at www.ferro.com.