KMG Chemicals reports 14% sequential increase in fiscal Q4 revenues, but expects net income to be half of Q3's US$2.6M partly on escalating raw material costs in electronic chemicals, wood treating segments
September 2, 2011
– KMG Chemicals, Inc. (NASDAQ:KMGB - News), a global provider of specialty chemicals in carefully focused markets, today announced preliminary earnings expectations for the fourth quarter and year ended July 31, 2011, and the scheduling of its fourth quarter and year end news release and conference call.
Neal Butler, President and CEO of KMG, stated, “We achieved record revenues in the fiscal 2011 fourth quarter, representing an approximate 14% increase over the fiscal 2011 third quarter. However, we anticipate fourth quarter net income will be about half the net income of $2.6 million, or $0.23 per diluted share, reported in the third quarter of fiscal 2011. Despite the decline in income, we are optimistic as we enter fiscal 2012.
“Fourth quarter operating profits in our Electronic Chemicals segment were well below expectations, with most of the shortfall due to raw material cost increases and certain extraordinary integration costs associated with the completion of the consolidation of our manufacturing sites. With this consolidation completed, our operations team has been successful in reducing plant related costs, with the full benefit of these reductions to be realized in fiscal 2012.”
Mr. Butler continued, “Pricing actions were implemented in the third and fourth quarters to capture the raw material cost increases incurred earlier in the year; however, these costs continued to escalate unexpectedly through the fourth quarter, pushing our pricing strategy about one quarter behind schedule. Historically, we have been able to fully recover cost increases within a reasonable period; however, as previously reported, we postponed necessary price increases to ensure a smooth and complete requalification process by our customers of the products impacted by our plant consolidation initiative. This strategy was successful, as we maintained virtually all of the pre-integration sales volumes of these products. Our pricing strategy is in place to capture all of those cost increases and we expect to return to normalized margins early in fiscal 2012.
”Wood treating also contributed to the shortfall, but to a much lesser extent. Creosote sales in the fourth quarter rebounded as anticipated; however, cost increases from creosote suppliers continued, pressuring margins. Pricing actions have been implemented that we expect will capture those cost increases in the first quarter of fiscal 2012.”
Mr. Butler concluded, “While we were disappointed in fiscal fourth quarter earnings, we are encouraged by the strong demand environment in our Wood Treating and Electronic Chemicals business units, and we are optimistic that this will continue through fiscal 2012. Combined with the successful completion of our plant consolidation initiative and associated synergies, as well as the implementation of our pricing strategies across all products, we expect fiscal 2012 will be a year of record earnings for KMG. Additionally, we have a very active acquisition pipeline, and are excited about the various opportunities we are pursuing.”
Fourth Quarter Results & Conference Call
KMG will elaborate further on its fourth quarter financial results on Thursday, October 13, 2011, when it issues a news release prior to the open of the stock market, and in its quarterly conference call, hosted by Neal Butler, and John Sobchak, CFO, at 10:00 a.m. ET. Interested parties may participate in the call by dialing 877-423-9820 (domestic) or 201-493-6749 (international). Please call in 10 minutes before the call is scheduled to begin, and ask for the KMGB call.
The conference call will also be webcast live via the “Investor Relations” section of the Company’s website at www.kmgchemicals.com. To listen to the live call please go to the website at least 15 minutes early to register, download and install any necessary audio software. If you are unable to listen live, the conference call will be archived on the website.
KMG Chemicals, Inc., through its subsidiaries, produces and distributes specialty chemicals to carefully focused markets. The Company grows by acquiring and optimizing stable chemical product lines and businesses with established production processes. Its current operations are focused on the wood treatment, electronic, and agricultural chemical markets. For more information, visit the Company's web site at www.kmgchemicals.com.
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