Rockwood profits surge 87% year-over-year to US$75.9M in Q3 on strong demand, solid order patterns across businesses; revenues rise 17% to US$940.9M

PRINCETON, New Jersey , October 19, 2011 (press release) – Net Sales Up 17.4%; Adjusted EBITDA from Continuing Operations Up 41.3%; As Reported EPS from Continuing Operations of $0.95 vs. $0.49; As Adjusted EPS from Continuing Operations of $1.06 vs. $0.51

Rockwood Holdings, Inc. (NYSE:ROC - News), a global producer of specialty chemicals and advanced materials, today reported earnings per share from continuing operations of $0.95 for the third quarter of 2011 as compared to $0.49 for the same period in the prior year. Rockwood’s as adjusted earnings per share increased to $1.06 in the third quarter of 2011 from $0.51 for the same period in the prior year.

Seifi Ghasemi, Chairman and Chief Executive Officer, said, “This quarter’s superior results are further confirmation of the fundamental strength of Rockwood’s unique portfolio of inorganic specialty chemicals. This quality, combined with our constant focus on productivity, enabled us to achieve a record Adjusted EBITDA margin of 24.1 percent for the quarter. Continued strong volume growth in our lithium, surface treatment and clay-based additives businesses, combined with improved pricing in titanium dioxide and lithium, enabled us to more than double our adjusted EPS for the quarter. All of our business units have improved performance versus last year, and we generated a very strong free cash flow of $135 million for the third quarter.”

The highlights from continuing operations for the third quarter and nine months ended September 30, 2011 are as follows:

* Net sales were $940.9 million for the third quarter of 2011, up 17.4% compared to $801.2 million for the same period in the prior year. Net sales were $2,854.9 million for the nine months ended September 30, 2011, up 19.3% compared to $2,393.3 million for the same period in the prior year.

* Adjusted EBITDA was $226.9 million for the third quarter of 2011, up 41.3% compared to $160.6 million for the same period in the prior year. Adjusted EBITDA was $667.1 million for the nine months ended September 30, 2011, up 38.8% compared to $480.7 million for the same period in the prior year.

* On a constant-currency basis, net sales and Adjusted EBITDA were up 10.4% and 32.1%, respectively, for the third quarter of 2011 and were up 13.3% and 31.2%, respectively, for the nine months ended September 30, 2011 compared to the same period in the prior year.

* Net income attributable to Rockwood Holdings, Inc. for the third quarter of 2011 was $75.9 million, including after-tax net special charges of $8.8 million. Net income attributable to Rockwood Holdings, Inc. for the third quarter of 2010 was $38.0 million, including after-tax net special charges of $2.1 million.

Net income attributable to Rockwood Holdings, Inc. for the nine months ended September 30, 2011 was $228.1 million, including after-tax net special charges of $20.4 million. Net income attributable to Rockwood Holdings, Inc. for the nine months ended September 30, 2010 was $116.2 million, including income of $5.7 million related to after-tax net special items.

* Diluted earnings per share for the third quarter of 2011 were $0.95, including after-tax net special charges of $0.11. Excluding net special charges, diluted earnings per share were $1.06 in the third quarter of 2011. Diluted earnings per share for the third quarter of 2010 were $0.49, including after-tax net special charges of $0.02. Excluding net special charges, diluted earnings per share were $0.51 in the third quarter of 2010.

Diluted earnings per share for the nine months ended September 30, 2011 were $2.85, including after-tax net special charges of $0.26. Excluding net special charges, diluted earnings per share were $3.11 for the nine months ended September 30, 2011. Diluted earnings per share for the nine months ended September 30, 2010 were $1.50, including income of $0.08 related to after-tax net special items. Excluding net special items, diluted earnings per share were $1.42 for the nine months ended September 30, 2010.

* See reconciliations of net income/EPS as reported to net income/EPS as adjusted at the end of this release for details of the special charges/items discussed above.

Commenting on the outlook, Mr. Ghasemi said, “Rockwood continues to benefit from the fundamental strengths of a focused portfolio of specialty businesses. Demand for our products is strong, and we continue to see solid order patterns across our businesses. We expect to maintain our margins and are optimistic about our prospects. We intend to use our strong cash flow to invest in organic growth and to reduce leverage in line with our long-term objectives.”

Third quarter results, as compared with the same period a year ago, are summarized below:

* Specialty Chemicals: Net sales and Adjusted EBITDA increased 17.4% and 22.2%, respectively.

o In our Fine Chemicals business, higher volumes of lithium products, as well as increased selling prices, were partially offset by higher raw material costs primarily in our Metal Sulfides business.

o In our Surface Treatment business, increased selling prices, as well as higher volumes in most markets, particularly in automotive and general industrial, were partially offset by higher raw material costs.

* Performance Additives: Net sales and Adjusted EBITDA increased 6.9% and 7.0%, respectively.

o Net sales and Adjusted EBITDA were up from increased selling prices, as well as higher volumes of specialty coatings and oilfield applications in our Clay-based Additives business.

o Adjusted EBITDA was negatively impacted by lower volumes in our Color Pigments and Services and Timber Treatment Chemicals businesses and higher raw material costs.

* Titanium Dioxide Pigments: Net sales and Adjusted EBITDA increased 31.1% and 119.0%, respectively.

o Net sales and Adjusted EBITDA were up primarily from higher selling prices and, to a lesser extent, a favorable product mix.

o Adjusted EBITDA was negatively impacted by lower volumes and higher production, raw material and energy costs.

* Advanced Ceramics: Net sales and Adjusted EBITDA increased 11.6% and 17.9%, respectively.

o Net sales and Adjusted EBITDA were up from higher volumes in most product applications, particularly cutting tool and mechanical applications.

o Adjusted EBITDA was favorably impacted by lower maintenance costs.

Other Items:

* Interest expense, net decreased $12.3 million in the third quarter of 2011 compared to the same period in the prior year. The third quarter of 2011 included non-cash losses of $3.9 million and the third quarter of 2010 included non-cash gains of $1.2 million, representing the movement in the mark-to-market valuation of our interest rate swaps. Excluding the impact of these losses and gains, interest expense, net decreased $17.4 million primarily due to debt repayments and lower interest rates related to the refinancing of our senior secured term loans in February 2011.

* Income taxes. The effective income tax rate for the third quarter of 2011 was 28.2% and was favorably impacted by a beneficial foreign earnings mix and certain domestic income that was not tax effected.

* Free cash flow was an inflow of $135.0 million for the third quarter of 2011 and consisted of net cash provided by operating activities of continuing operations of $201.9 million plus special items and other, net of $3.7 million, less capital expenditures, net of $70.6 million.

* Net debt, which is total debt less cash and cash equivalents, was $1,371.3 million as of September 30, 2011 compared to $1,836.9 million as of December 31, 2010. The decrease in net debt was primarily due to proceeds from the sale of our AlphaGary plastic compounding business in January 2011 and cash generated from operations in the nine months ended Sept.  

Rockwood Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Dollars in millions, except per share amounts; shares in thousands)
(Unaudited)
 
    Three months ended   Nine months ended
    September 30,   September 30,
    2011   2010   2011   2010
Net sales   $ 940.9     $ 801.2     $ 2,854.9     $ 2,393.3  
Cost of products sold     609.4       535.2       1,856.7       1,601.5  
Gross profit     331.5       266.0       998.2       791.8  
                 
Selling, general and administrative expenses     176.0       167.7       537.8       501.8  
Restructuring and other severance costs     4.5       1.5       9.5       2.8  
Asset write-downs and other     -       0.1       0.3       2.4  
Operating income     151.0       96.7       450.6       284.8  
                 
Other expenses, net:                
Interest expense, net (a)     (26.3 )     (38.6 )     (74.0 )     (116.7 )
Loss on early extinguishment/modification of debt     (0.1 )     (1.6 )     (16.6 )     (1.6 )
Foreign exchange (loss) gain on financing activities, net     (2.4 )     0.9       1.8       0.8  
Other, net     -       -       (0.1 )     0.5  
Other expenses, net     (28.8 )     (39.3 )     (88.9 )     (117.0 )
                 
Income from continuing operations before taxes     122.2       57.4       361.7       167.8  
Income tax provision     34.4       16.4       101.0       46.4  
Income from continuing operations     87.8       41.0       260.7       121.4  
Income from discontinued operations, net of tax     -       2.5       0.9       13.6  
Gain on sale of discontinued operations, net of tax     -       -       119.4       -  
Net income     87.8       43.5       381.0       135.0  
Net income attributable to noncontrolling interest     (11.9 )     (3.0 )     (32.6 )     (5.2 )
Net income attributable to Rockwood Holdings, Inc.   $ 75.9     $ 40.5     $ 348.4     $ 129.8  
                 
Amounts attributable to Rockwood Holdings, Inc.:                
Income from continuing operations   $ 75.9     $ 38.0     $ 228.1     $ 116.2  
Income from discontinued operations     -       2.5       120.3       13.6  
Net income   $ 75.9     $ 40.5     $ 348.4     $ 129.8  
                 
Basic earnings per share attributable to Rockwood Holdings, Inc.:                
Earnings from continuing operations   $ 0.99     $ 0.51     $ 2.98     $ 1.55  
Earnings from discontinued operations (b)     -       0.03       1.58       0.19  
Basic earnings per share   $ 0.99     $ 0.54     $ 4.56     $ 1.74  
                 
Diluted earnings per share attributable to Rockwood Holdings, Inc.:                
Earnings from continuing operations   $ 0.95     $ 0.49     $ 2.85     $ 1.50  
Earnings from discontinued operations (b)     -       0.03       1.51       0.17  
Diluted earnings per share   $ 0.95     $ 0.52     $ 4.36     $ 1.67  
                 
Weighted average number of basic shares outstanding     76,703       75,199       76,430       74,735  
Weighted average number of diluted shares outstanding     80,030       78,086       79,907       77,671  
                 
(a) Interest expense, net includes:
Interest expense on debt, net   $ (21.2 )   $ (38.4 )   $ (71.3 )   $ (121.1 )
Mark-to-market (losses) gains on interest rate swaps     (3.9 )     1.2       1.0       8.9  
Deferred financing costs     (1.2 )     (1.4 )     (3.7 )     (4.5 )
Total   $ (26.3 )   $ (38.6 )   $ (74.0 )   $ (116.7 )
 
(b) Primarily relates to the gain on sale of the AlphaGary plastic compounding business for the nine months ended September 30, 2011.
 

 

 

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