St. Louis, MO, Apr. 24--Solutia Inc. had a first quarter loss from continuing operations of $17 million, or $0.16 per share, on net sales of $596 million. This compares to income from continuing operations for the first quarter last year of $4 million, or $0.04 per share, on net sales of $520 million.
Solutia's continuing operations for the first quarter versus the year ago period were negatively impacted by elevated raw material and energy costs, increased interest expense and lower equity earnings from joint ventures, offset to some extent by higher sales prices, increased sales volumes and favorable currency exchange rate fluctuations.
The first quarter net loss included net charges of approximately $9 million after tax, resulting from several events. The company eliminated approximately 170 positions during the quarter, incurring severance charges of $7 million after tax. The Flexsys and Astaris joint ventures, in which the company has a 50% ownership stake, incurred restructuring charges during the quarter related to asset impairments and severance charges. Solutia's share of these charges was approximately $5 million after tax. In addition, Solutia realized a benefit of $3 million after tax related to the recovery of certain receivables, established prior to 1997, which had previously been written off.
"During the quarter, Solutia showed considerable improvement in volume growth both sequentially and on a year-over-year basis. However, we continued to be adversely impacted by the weakened state of the global economy and the dramatic rise in raw material and energy costs due to the war in Iraq and a declaration of force majeure by certain suppliers of propylene, a key raw material for Solutia," said chairman and CEO John Hunter. "We continue to take the actions necessary to offset these circumstances, such as reducing our cost to operate as well as passing along price increases in many of our business lines.
"Solutia and many of its peer companies continue to experience a difficult operating environment highlighted by a continued weakness in the manufacturing sector, underutilization of assets, intense competitive pricing pressure, and raw material and energy costs that are not indicative of current supply and demand dynamics."
Solutia reported a consolidated net loss of $19 million, or $0.18 per share, for the first quarter versus a consolidated net loss of $153 million, or $1.46 per share, for the first quarter of last year. Consolidated earnings for the first quarter included a net loss of $2 million from the results of the resins, additives and adhesives businesses, which are presented as discontinued operations. Consolidated earnings for the first quarter of last year included a $167 million charge associated with the adoption of the goodwill and intangible asset accounting standard, a gain of $3 million after tax from the sale of Solutia's interest in the Advanced Elastomer Systems joint venture and net income of $10 million from the results of discontinued operations.
Integrated nylon's net sales for the first quarter increased $57 million compared to the first quarter last year driven by improved prices and volumes. First quarter price increases occurred principally in nylon intermediate chemicals. While the company announced price increases in nylon carpet fibers during the quarter, they were not effective until April 1. Sales volumes were up in most segments and included benefits from reintegrating the marketing responsibilities for nylon molding resins. These activities were previously performed under a marketing alliance with Dow Plastics, a business unit of Dow Chemical.
Integrated nylon's segment profitability decreased $18 million over the prior year quarter. This was primarily due to approximately $60 million of higher raw material and energy costs and severance charges incurred in the quarter, which were partially offset by higher net sales and favorable manufacturing variances.
