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Minerals Technologies Inc. recently announced a restructuring program that will focus mainly on its Refractories business. The company aims to curtail significant losses in this business segment, which has been deeply affected by the ongoing worldwide economic recession, and improve near-term performance. This restructuring program reflects the company’s ongoing strategy to be optimally positioned for profitability in changing economic conditions.
The company will take special charges of $55 million in the second quarter, the majority of which relate to the Refractories business, which has been hard-hit by the downturn in the worldwide steel industry and posted a loss of $2.18 per share for the second quarter. Excluding these special items, diluted earnings per share were $0.15 per share.
“The downturn in the worldwide steel industry, which has resulted in nearly a 50% reduction in demand in the United States, our largest market, has had a severe impact on our Refractories operations,” said Joseph C. Muscari, chairman and CEO. “We will consolidate operations and reduce our workforce in the Refractories business to meet this reduction in demand. We have also, however, taken restructuring charges in our other businesses and support functions, which will allow us to operate more effectively at these lower levels of demand and will position Minerals Technologies to achieve greater profitability as the economic environment improves.”
The major components of the restructuring program include consolidation of operations, rationalization of some product lines, and streamlining management structures for a more cost-effective business model. In the Refractories segment, the company will consolidate North American refractory operations in Old Bridge, N.J., into Bryan, Ohio, and Baton Rouge, La., in order to improve manufacturing efficiencies and reduce transportation costs. The company will also rationalize its North American specialty shapes product line and European refractory operations. In Asia, Minerals Technologies will consolidate refractory operations and actively seek a regional alliance to aid in the marketing of its high-value products there as a result of difficulties penetrating that market.
The company recorded a restructuring charge to reflect severance and other costs related to plant consolidations, as well as the streamlining the management structure to operate more efficiently in the current economic environment. In discontinued operations, the company recorded impairment charges to recognize the lower market value of its Mt. Vernon, Ind., operations, which have been held for sale since October 2007.
The company anticipates annualized savings from the restructuring actions to be between $16 million and $20 million upon completion of the program in the second quarter of 2010.
Due to restructuring activities, the company reported a second quarter net loss of $40.9 million ($2.18 per share), compared to net income of $4.2 million ($0.22 per share) in the first quarter of 2009. Excluding special items, net income for the second quarter was $2.9 million ($0.15 per share), a 40% decrease from the $0.25 per share in the first quarter of 2009.
The company’s worldwide sales in the second quarter were $208.6 million, a slight increase over the $208.3 million reported in the first quarter of 2009; foreign exchange had a favorable impact on sales of approximately $2.5 million. Operating income, excluding special items, was $5.5 million, a 29% decrease from the $7.8 million reported in the first quarter of 2009.
For the second quarter, worldwide sales in the company’s Specialty Minerals segment, which consists of precipitated calcium carbonate (PCC) and Processed Minerals, were $152.0 million, compared with $143.6 million in the first quarter of 2009. The 6% increase was primarily the result of volume increases for both product lines. Income from operations for the Specialty Minerals segment, excluding special items, was $13.2 million, a 32% increase over the $10.0 million recorded in the previous quarter.
Worldwide sales of PCC, which is used mainly in the manufacturing processes of the paper industry, were $127.7 million, a 4% increase over the $123.1 million recorded in the first quarter of 2009. This increase was associated primarily with higher PCC volumes, reflecting a slight increase in North American paper shipments.
Sales of Processed Minerals products were $24.3 million, up 19% over the $20.5 million recorded in the previous quarter. This increase was primarily due to seasonal demand in this product line during the second quarter. Processed Minerals products, which include ground calcium carbonate and talc, are used in the building materials, polymers, ceramics, paints and coatings, glass, and other manufacturing industries.
“The performance improvement in the Specialty Minerals segment was due not only to the volume increases in both the PCC and Processed Minerals products lines, but also to a 12% improvement in productivity in our Specialty PCC, ground calcium carbonate and talc operations, as our Operational Excellence initiatives are beginning to show results,” said Muscari.
In the company’s Refractories segment, sales in the second quarter of 2009 were $56.6 million, a 13% decline from the $64.7 million recorded in the first quarter of 2009. This decline was primarily related to volume decreases of approximately 9%. The Refractories segment, which provides products and services primarily to the worldwide steel industry, recorded an operating loss of $7.1 million, excluding special items, compared with a loss of $1.9 million for the first quarter. The increase in operating loss was primarily due to sales volume declines; consumption of higher-cost magnesium oxide, the primary raw material for refractories products; and manufacturing inefficiencies caused by low utilization rates in the refractory manufacturing facilities.
Additional details are available at www.mineralstech.com.