OMNOVA Solutions Updates 2011 Earnings Estimate
FAIRLAWN, Ohio, Aug. 30, 2011 /PRNewswire/ -- OMNOVA Solutions (NYSE: OMN) today announced that the Company is revising its 2011 full year adjusted earnings estimate. OMNOVA now expects adjusted diluted earnings per share for the fiscal year ending November 30, 2011 to be between $0.40 and $0.44, as compared to its prior estimate of approximately $0.60 provided during its second quarter earnings call in June.
The updated estimate reflects a reduction in market volumes resulting from a deceleration in the global economy in the third quarter, as well as the rapid escalation in raw material costs to unprecedented highs. These conditions are expected to continue to be dynamic in the fourth quarter.
"The global economy has recently slowed and become more uncertain and, as a result, demand across many OMNOVA markets has weakened," said Kevin McMullen, OMNOVA Solutions' Chairman and CEO. "At the same time, despite the recent drop in oil prices, the costs for key raw materials such as butadiene and many acrylics have continued to rise to record levels."
Second half 2011 volumes in Performance Chemicals are expected to be down 4-5%, as compared to 2010, driven primarily by weaker paper and carpet markets. This compares to flat year-over-year volumes during the first half of 2011. The Company does not believe there has been any significant loss of market share in 2011. Second half 2011 Decorative Products volumes are expected to be down 10-12% as compared to a year ago, driven primarily by lower global market demand for coated fabrics. Full year 2011 raw material inflation is now expected to increase by a record amount of approximately $140 million for the OMNOVA legacy (excluding ELIOKEM) business as compared to a year ago. This exceeds last year's record inflation by almost $45 million. Pricing actions are expected to total $130 million in 2011 - a record increase - but still lag the raw material inflation primarily due to timing in index contracts. Historically, operating profit has improved as raw material costs have stabilized or declined, and contracts with index pricing mechanisms have had time to catch up.
"While we face near-term profit headwinds, we remain encouraged by the long-term earnings prospects of OMNOVA as we continue to take actions to improve our earnings capability," said McMullen. "In particular, we are making significant progress in Performance Chemicals' integration of our ELIOKEM acquisition, building on our manufacturing footprint and new technology offerings. For example, a key global specialty chemical initiative is the production ramp-up at our new specialty latex facility in Caojing, China. Despite the record cost inflation and weaker volumes, Performance Chemicals is expected to have its second highest pro forma annual operating profit in its history."
OMNOVA Solutions plans to announce results for the third quarter ending August 31, 2011 on September 27, 2011. Company management will conduct its third quarter earnings call on Wednesday, September 28, 2011 at 11:00am ET.
This Earnings Release includes adjusted diluted earnings per share which is a non-GAAP financial measure as defined by the Securities and Exchange Commission. This adjusted financial measurement is not a measurement of financial performance under GAAP and such financial measure should not be considered as an alternative to diluted earnings per share determined in accordance with GAAP. Because of the forward looking nature of this financial measure, it is not practical to present a reconciliation to the GAAP measure.
This press release includes "forward-looking statements" as defined by federal securities laws. These statements, as well as any verbal statements by the Company in connection with this press release, are intended to qualify for the protections afforded forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect management's current expectation, judgment, belief, assumption, estimate or forecast about future events, circumstances or results and may address business conditions and prospects, strategy, capital structure, sales, profits, earnings, markets, products, technology, operations, customers, raw materials, financial condition, and accounting policies, among other matters. Words such as, but not limited to, "will," "may," "should," "projects," "forecasts," "seeks," "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "optimistic," "likely," "would," "could," and similar expressions or phrases identify forward-looking statements.
All forward-looking statements involve risks and uncertainties. Many risks and uncertainties are inherent in business generally and the markets in which the Company operates or proposes to operate. Other risks and uncertainties are more specific to the Company's businesses including businesses the Company acquires. The occurrence of such risks and uncertainties and the impact of such occurrences is often not predictable or within the Company's control. Such impacts could adversely affect the Company's results and, in some cases, such effect could be material.
All written and verbal forward-looking statements attributable to the Company or any person acting on the Company's behalf are expressly qualified in their entirety by the risks, uncertainties, and cautionary statements contained herein. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation, and specifically declines any obligation other than that imposed by law, to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Risks and uncertainties that may cause actual results to differ materially from expected results include, among others: the Company's ability to successfully integrate ELIOKEM into its operations; the Company's ability to achieve fully the strategic and financial objectives related to the acquisition of ELIOKEM, including the acquisition becoming accretive to the Company's earnings; and unexpected costs or liabilities that may arise from the acquisition, ownership or operation of ELIOKEM.
Additional risk factors include: economic trends affecting the economy in general and/or the Company's end-use markets; prices and availability of raw materials including styrene, butadiene, vinyl acetate monomer, polyvinyl chloride, acrylonitrile, acrylics and textiles; ability to increase pricing to offset raw material cost increases; product substitution and/or demand destruction due to product technology, performance or cost disadvantages; loss of a significant customer; customer and/or competitor consolidation; customer bankruptcy; ability to successfully develop and commercialize new products; a decrease in demand for domestically manufactured products due to increased foreign competition and off-shoring of production; ability to successfully implement productivity enhancement and cost reduction initiatives; unplanned full or partial suspension of plant operations; losses from the Company's strategic alliance, joint venture, acquisition and integration activities; loss or damage due to acts of war or terrorism, natural disasters or accidents, including fires, floods, explosions and releases of hazardous substances; ability to comply, and cost of compliance with legislative and regulatory changes, including changes impacting environmental, health and safety compliance and changes which may restrict or prohibit certain products and raw materials; rapid inflation in health care costs and assumptions used in determining health care cost estimates; risks associated with foreign operations including political unrest and fluctuations in exchange rates of foreign currencies; prolonged work stoppage resulting from labor disputes with unionized workforce; changes in and compliance with pension plan funding obligations; stock price volatility; infringement or loss of the Company's intellectual property; litigation and claims against the Company related to products, services, contracts, employment, environmental, safety, intellectual property and other matters; adverse litigation judgments or settlements; absence of or inadequacy of insurance coverage for litigation judgments, settlements or other losses; availability of financing at anticipated rates and terms; and loan covenant default arising from substantial debt and leverage and the inability to service that debt, including increases in applicable short-term or long-term borrowing rates.
For further information on risks and uncertainties, see the Company's Form 10-K and 10-Q filings with the Securities and Exchange Commission.
OMNOVA Solutions is a technology-based company with pro forma sales for the twelve months ending May 31, 2011 of $1.2 billion and a global workforce of approximately 2,800. OMNOVA is an innovator of emulsion polymers, specialty chemicals, and decorative and functional surfaces for a variety of commercial, industrial and residential end uses. Visit OMNOVA Solutions on the internet at www.omnova.com.
SOURCE OMNOVA Solutions