Omnova Solutions Q3 Profit Falls - Quick Facts

(RTTNews) - Omnova Solutions Inc. (OMN) reported that its net income for the third quarter ended August 31, 2014 dropped to $1.8 million or $0.04 per share, from $9.0 million, or $0.19 per share in the third quarter of 2013.

Adjusted income from continuing operations fell to $2.2 million or $0.05 per share, from $8.7 million or $0.19 per share last year. Analysts polled by Thomson Reuters expected the company to report earnings of $0.18 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales decreased 3.5% to $252.1 million, from $261.2 million for the third quarter of 2013. The sales decline was a result of reduced pricing of $5.8 million, or 2.2%, and reduced volume of $3.6 million, or 1.4%, partially offset by favorable currency translation effects of $0.3 million.

The pricing decline was primarily the result of contract pricing reductions, particularly in paper coatings, negotiated earlier in the year in response to increased competitive intensity, and lower raw material costs and their related impact on index pricing formulas in the Performance Materials product lines.

The volume decline also was related primarily to paper coatings. Key specialty lines of business continued to increase with particular strength in oil & gas, specialty coatings and in Engineered Surfaces' laminates.

The company expects sequential profit improvement from the third quarter to the fourth quarter of fiscal 2014 from increased Chinese sales, stronger paper and carpet margins and continued growth in oil & gas, specialty coatings and laminates.

Additionally, the company said it is taking actions to optimize its manufacturing infrastructure, reducing production costs and improving utilization to support growth in key lines of business with a target of overall double-digit operating margins.

It is in the process of transferring production of liquid products from its Akron facility to its Mogadore facility, where it is repurposing capacity to support production of higher margin specialty products. This action will result in a reduction of overall capacity and $4.0 million of annual savings, which the company expects to begin to receive mid next year. Additionally it has expanded specialty chemical capacity in Asia to address that market's high margin, high growth specialty categories.