Omnova Solutions Lowers Q4, 2013 Earnings Outlook

(RTTNews) - Omnova Solutions Inc. (OMN) on Friday lowered its earnings outlook for the fourth quarter as well as fiscal 2013, citing the adverse impact of several items. The specialty chemicals company's shares are down more than 5 percent in pre-market trades.

For the fourth quarter, Fairlawn, Ohio-based Omnova now forecasts reported earnings per share in a range of about $0.16 to $0.18 per share, compared to earnings of $0.01 per share in the same period last year. On average, four analysts polled by Thomson Reuters expect the company to report earnings of $0.20 per share for the quarter. Analysts' estimates typically exclude special items.

Omnova had earlier said that it expects fourth-quarter results to be significantly above the fourth quarter of the prior year, but similar to earnings of $0.19 per share in the third quarter of 2013.

Omnova noted that the previously forecasted results for the fourth quarter are now expected to be adversely impacted by several items.

These include the impact of a flood at Engineered Surfaces' Minhang in China, unanticipated raw material shortage and lower than expected paper chemical volumes as well as margins at the Performance Chemicals operations in Ningbo, China; and anticipated higher raw material costs as well as health care costs in the fourth quarter.

These items are expected to be partially offset by a one-time gain on the asset sale of a previously idled plant in China and projected lower effective tax rates in several countries.

Kevin McMullen, Chairman and Chief Executive Officer of Omnova Solutions said, "While fourth quarter 2013 results are now expected to be lower than we previously forecasted, we expect them to be well above last year's fourth quarter."

McMullen added, "We continue to work on a number of key structural improvements in Performance Chemicals and Engineered Surfaces that should positively contribute to future results. Included in those improvements are the recent start-up of new specialty chemicals capacity in China, emulsion polymer and engineered surfaces manufacturing footprint consolidation in the U.S., and several exciting new product launches."

Looking ahead to fiscal 2013, Omnova Solutions now forecasts adjusted income from continuing operations before items in a range of $22.5 million to $24.5 million. This compares to adjusted income from continuing operations of $28.5 million in 2012.

The company had earlier forecast fiscal 2013 adjusted income from continuing operations to approximate full-year 2012 levels.

In late September, Omnova Solutions reported an increase in net income for the third quarter to $9.0 million or $0.19 per share from $6.4 million or $0.14 per share in the prior-year period. Adjusted income from continuing operations for the quarter was $9.1 million or $0.19 per share. Net sales for the quarter decreased 9 percent to $261.2 million from $288.2 million in the year-ago period.

OMN closed Thursday's trading at $8.66. In Friday's pre-market trades, the stock is down $0.45 or 5.20 percent to $8.21.