Rockwood Holdings Q2 Profit Plunges, Misses Estimates; Sales Rise

(RTTNews) - Specialty chemicals firm Rockwood Holdings, Inc. (ROC) reported Monday that its second-quarter profit plunged from last year, due to charges, the absence of prior year's gains as well as weak Titanium Dioxide Pigments performance. Adjusted earnings missed analysts' estimates, despite higher sales that topped their view.

For the second quarter, net income attributable to shareholders fell 85.6 percent to $32.3 million, or $0.41 per share, from $224.9 million, or $2.81 per share in the prior-year quarter.

The latest quarter results included other net charges of $25.5 million, mainly related to the non-core business sales process, particularly Advanced Ceramics and Clay-based Additives. The company agreed to sell Advanced Ceramics business on June 14 for 1.49 billion euros, and Clay-based Additives business on July 26 for $635 million. The prior-year results included other net benefits of $125.8 million, chiefly related to the reversal of a majority of its federal tax valuation allowance.

Excluding items, adjusted net income stood at $57.8 million, or $0.73 per share, compared to last year's $99.1 million, or $1.24 per share. On average, eight analysts polled by Thomson Reuters expected earnings of $0.76 per share for the quarter. Analysts' estimates typically exclude one-time items.

Total adjusted EBITDA fell 25.1 percent, and adjusted EBITDA from continuing operations declined 33 percent.

Quarterly net sales, including discontinued operations, grew 7.4 percent to $972.3 million from $905.6 million last year, whereas 7 analysts estimated revenues of $955.94 million for the quarter. On a constant currency basis, sales grew 6.6 percent.

Chairman and Chief Executive Officer Seifi Ghasemi said, "Our core Lithium and Surface Treatment business segments performed well within expectations, delivering improved quarter on quarter Adjusted EBITDA performance and strong margins of 39 percent and 23 percent, respectively. These results however, were overshadowed, as we had indicated on our April 30 first quarter earnings call, by continued weak performance from the Titanium Dioxide Pigments business."

Titanium Dioxide Pigments' net sales increased 30.3 percent benefited from higher volumes, while Adjusted EBITDA decreased 117.3 percent primarily from lower selling prices and continued lower fixed cost absorption related to lower production levels to reduce inventory.

The company added that its Performance Additives segment did not perform to expectations due to a slow recovery in consumer discretionary spending for remodeling activities and weaker starts of new homes impacted by both economic and adverse weather conditions in the US.

Performance Additives' sales decreased primarily due to lower volumes from timber treatment chemicals, coatings applications and construction in Europe in Color Pigments and Services, partially offset by higher volumes from North American oil and natural gas drilling and improved construction volumes in the U.S.

Looking ahead, Ghasemi said, "For the second half of the year, we expect our Lithium and Surface Treatment businesses to continue to show growth and maintain strong margins. Further, we believe that our Titanium Dioxide business will achieve a turn-around with Adjusted EBITDA margins trending in excess of 10 percent."

Rockwood shares closed Friday's trading at $68.24, up $0.30 or 0.44 percent