Fairlawn, OH, January 27--OMNOVA Solutions reported a loss of $14.7 million, or $0.36 per diluted share, for the fourth quarter of 2004, compared to a loss of $61.3 million, or $1.53 per diluted share, during the fourth quarter of 2003.
Sales increased 10.4%, or $18.2 million, to $194.0 million for the fourth quarter of 2004 as compared to $175.8 million during the same period a year ago. Contributing to the sales increase were pricing improvements of $18.0 million.
Cost of goods sold for the fourth quarter of 2004 increased $22.6 million to $156.1 million versus the same quarter last year, driven primarily by $21.4 million of higher raw material costs. Gross profit declined to $37.9 million in the fourth quarter of 2004 as compared to $42.3 million in 2003 due to higher raw material and warranty costs.
Selling, general and administrative costs increased $4.3 million to $37.5 million, or 19.3% of sales, in the fourth quarter of 2004 versus $33.2 million, or 18.9% of sales, in the fourth quarter of 2003 due to higher sales taxes, information technology and Sarbanes-Oxley 404 compliance related spending. Interest expense increased slightly to $5.2 million for the fourth quarter of 2004 as compared to $5.1 million for the same period a year ago, due to higher average borrowing rates.
The company's total debt at the end of the fourth quarter of 2004 was $181.7 million, a decrease of $3.7 million from the third quarter of 2004, and $10.5 million lower than last year.
"Additional pricing actions, a strong focus on cash flow, and good top line growth were the highlights of the quarter, but they were not enough to offset record raw material costs," said Kevin McMullen, OMNOVA Solutions' chairman and chief executive officer. "Our operating profit was impacted by oil prices at $55 per barrel during the quarter. However, we made significant progress in the fourth quarter in implementing price increases, with more on the way in early 2005. In addition to pricing initiatives, we are taking actions to help offset future raw material risk including leveraging new volume opportunities created by innovative new products and improving markets, restructuring our cost base, and using LEAN SixSigma programs to eliminate waste and improve customer satisfaction. As a result of our strong focus on cash flow actions, average debt declined almost $9 million to $201 million."
Performance Chemicals - Net sales during the fourth quarter of 2004 increased 20.4% to $100.9 million versus $83.8 million in the fourth quarter of 2003, led by higher average unit selling price. Segment operating profit was $4.0 million in the fourth quarter of 2004 as compared to $2.5 million in the fourth quarter of 2003. Excluding restructuring and severance charges of $0.2 million and a $2.7 million intangible asset write-off, segment operating profit in the fourth quarter of 2003 was $5.4 million.
As compared to last year, raw material costs were up $19.7 million during the quarter as a result of higher styrene, butadiene and acrylic costs driven by high oil and natural gas based feedstock costs, especially benzene, ethylene and propylene. Increased pricing to customers totaled $16.9 million versus the same period a year ago.
During the company's first quarter of 2005, raw material prices are expected to escalate in butadiene and acrylic monomers, while styrene is expected to moderate. In response to the continuing raw material inflation, Performance Chemicals achieved price increases totaling almost $30 million in fiscal 2004 and has announced additional price increases across all product lines in early 2005.
During the quarter, the company's RohmNova paper chemicals joint venture captured business with its new High Performance GenCryl(R) Platinum Pt coating products and continues trialing activity at several potential accounts.
