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Omnova Solutions adjusted income increased to $5.9 million

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Staff writer ▼ | January 20, 2016
Omnova Solutions announced adjusted income from continuing operations increased to $5.9 million, or $0.13 per diluted share, for the fourth quarter ended November 30, 2015.
Omnova Solutions
Omnova Solutions   The company recognized $28.6 million of pretax charges
SG&A in the fourth quarter of 2015 was $27.6 million.
This compares with fourth quarter 2014 Adjusted Income From Continuing Operations of $4.5 million, or $0.10 per diluted share. The increase was driven primarily by year-over-year margin expansion across Performance Chemicals and Engineered Surfaces and growth in higher-margin specialty businesses, partially offset by lower volumes in oil & gas and paper.

During the fourth quarter of 2015, the company recognized $28.6 million of pretax charges that are excluded from adjusted earnings (of which $26.4 million is non-cash) including charges associated with the continuation of restructuring initiatives announced earlier in 2015: plant closures; selling, general and administrative expense (SG&A) reductions; and key process improvements.

The rest of the pretax charges are related to environmental remediation costs, expenses associated with the early redemption of $50 million of Senior Notes, and an asset impairment of $18.3 million related to Omnova's facility in India.

Net sales for the fourth quarter decreased $43 million, or 17.7%, to $200 million, compared with $243.0 million for the comparable quarter last year.

Lower sales volume of $19.6 million, or 8.1%, was primarily related to the unfavorable market conditions in paper and oil & gas, partially offset by improved volumes in North American laminates, specialty coatings, construction materials, elastomeric modifiers, reinforcing rubber and antioxidants.

Other contributors to the sales decline included $17.8 million, or 7.3%, of reduced pricing, driven primarily by contract-based index pricing in certain markets tied to raw material price declines, and $5.6 million, or 2.3%, of negative currency translation effects, primarily from the euro and Thai bhat.

Gross profit in the fourth quarter of 2015 was $47.8 million, or 23.9% of net sales, compared to $48.5 million, or 20.0% of net sales, in the comparable quarter last year. The decrease in gross profit was due to the decline in volumes and foreign exchange, which were partially offset by cost reduction initiatives, higher margins, and mix, which drove the improved gross margin.

SG&A in the fourth quarter of 2015 was $27.6 million, down from $28.2 million in the fourth quarter of 2014, primarily reflecting the overall impact of the cost reduction initiatives, partially offset by increased investments in sales and marketing resources to support the higher-margin specialty lines of business.

Overall, the company continues to expect future SG&A benefits as the full impact of the restructuring actions is achieved.