Ferro Announces Improved Financial Results for Second Quarter (posted 8/19/08)
Income from continuing operations for the second quarter of 2008 included net pre-tax expenses of $13.8 million primarily related to restructuring charges, asset write-offs, and corporate development activities. In the second quarter of 2007, income from continuing operations included net pre-tax expenses of $10.0 million primarily related to litigation settlements and manufacturing rationalization costs.
“The Ferro team delivered outstanding performance in the quarter, from sales to net income,” said Chairman, President and Chief Executive Officer James F. Kirsch. “Our improved results came in spite of slowing economic growth and unprecedented cost increases for a number of raw materials. Our efforts to improve business operations and restructure manufacturing assets are generating results, and we are making sustainable progress toward our long-term profitability goals.”
Price increases and changes in foreign exchange were the most significant drivers of sales growth during the quarter. Price increases during the quarter include higher precious metal costs, which are passed through to customers as higher product prices. Changes in foreign currency exchange rates accounted for approximately 40% of the sales increase. Higher sales volumes also contributed to the sales increase, particularly in Electronic Materials and Color and Glass Performance Materials. Sales volumes declined in Polymer Additives and Specialty Plastics.
In the 2008 second quarter, sales growth was strongest in the Electronic Materials segment, driven by conductive pastes used by solar cell manufacturers, particularly in Asia. Increased precious metal costs, which are passed through to customers, also contributed to the sales increase. Sales growth was also strong in Performance Coatings and Color and Glass Performance Materials, driven by sales growth in Europe, the Middle East and North Africa. Sales in Polymer Additives grew primarily as a result of higher product pricing. Sales in Specialty Plastics declined as a result of lower demand from customers in the U.S. automotive, housing and appliance markets. This lower demand was not fully offset by higher average selling prices.
Gross profit percentage was 19.0% of sales for the second quarter of 2008, compared with 19.4% of sales in the second quarter of 2007. Gross profit for the 2008 second quarter was reduced by $1.4 million primarily as a result of asset write-offs and costs related to manufacturing rationalization activities. During the second quarter of 2007, gross profit was negatively impacted by an interruption of manufacturing activities at Ferro’s South Plainfield, N.J., facility and by manufacturing rationalization costs of $1.9 million. Higher raw material costs, primarily the cost of precious metals that are passed through to customers, contributed to the lower gross profit percentage for the 2008 second quarter.
The company expects sales to increase in the 2008 third quarter from the $551 million recorded in the third quarter of 2007. Consistent with historical seasonality, sales are forecast to decline sequentially from the second quarter of 2008. Sales for the third quarter, ending September 30, 2008, are expected to be in the range of $600 million to $625 million. The sales estimates for the third quarter are consistent with the company’s outlook for worldwide economic activity and its current view of the potential for increased commodity prices, higher energy costs and volatility in credit markets to affect customers’ demand for products.
Additional details are available at www.ferro.com.