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“As the global recession unfolded in the fourth quarter, we experienced dramatic and in many ways unprecedented declines in demand for our products, which significantly impacted our adjusted EBITDA,” said Jonathan Rich, president and chief executive officer. “Despite challenging market conditions, however, we made important progress in 2008, increasing our specialties mix, achieving our cost savings targets and exceeding our goals in working capital reductions. In 2009, we will remain focused on reducing our costs and saving cash through working capital and capital expenditure reductions.”
Net sales for the company’s Silicones segment in the fiscal year ended December 31, 2008, were $2,383.3 million, compared to $2,264.3 million for the same period in 2007, an increase of 5.3%. The increase was primarily due to an increase in selling prices and exchange rate fluctuations of 8.2%, partially offset by a decrease in sales volume of 4.5%. The selling price improvements were across all regions, and volume was down specifically in the U.S. and Western Europe.
Net sales for the Quartz segment in the fiscal year ended December 31, 2008, were $255.9 million, compared to $273.5 million for the same period in 2007, a decrease of 6.4%. The decrease was primarily due to lower sales volume in semiconductor-related products.
Cost of sales, excluding depreciation in the fiscal year ended December 31, 2008, was $1,837.8 million, compared to $1,653.1 million for the same period in 2007, an increase of 11.2%. The increase was primarily due to an increase in inflation on raw material, energy and transportation costs, partially offset by lower sales volume and the inventory fair value step up cost related to purchase accounting of $30.0 million in 2007. In addition, cost of sales was impacted by changes in foreign currency exchange rates.
Gross profit in the fiscal year ended December 31, 2008, was $801.4 million, compared to $884.7 million for the same period in 2007, a decrease of 9.4%. The decrease was primarily due to increased cost of sales, offset by the effects described above in net sales and the purchase accounting item noted above.
Over the first 11 weeks of the first quarter of 2009, Momentive continued to see weak demand in all regions across all major product segments, and it expects more of the same for the remainder of the quarter. While the company has seen deflation in certain raw materials, the impact of this effect has been marginal in comparison to the drop-off in product demand. As a result, Momentive currently expects first quarter 2009 revenue in the range of $410 million to $440 million, GAAP operating loss of $60 million to $75 million and adjusted EBITDA of $5 million to $15 million. Momentive also expects to have total debt net of cash of between $2,850 million to $2,910 million at the end of the first quarter of 2009.
For more information, visit www.momentive.com.