Omnova expects lower raw materials costs to cushion Q2 losses

Beachwood, Ohio—Omnova Solutions Inc. has recently posted a pre-tax loss of $3.9 million (€3.4 million) on second quarter net sales up 9.6% year-on-year to $221.3 million – compared to a profit of $10.4 million in the same three months of last year

The Beachwood-based company’s polymer and chemicals portfolio encompasses additives, stabilisers and modifiers for polymer products, including tire cord, reinforced rubber components and moulded rubber goods.

Omnova linked its earnings decline to an impairment cost of about $12.9 million related to a soon-to-be-rationalised coated-fabrics unit in China, and additional restructuring charges of about $2.4 million.

Also, in a 28 June statement, president and CEO Anne Noonan said raw materials costs had declined rapidly after a spike in March but still impacted gross profit margins by about $5.2 million.

Looking to the rest of the year, Noonan expected “margins to recover with pricing actions and some softening in raw materials."

Omnova, which employs about 2,000 people worldwide, has recently realigned its business and related reporting into two new segments: Specialty Solutions and Performance Materials.

Specialty Solutions is focused on “higher and more sustainable margins in faster growing markets” with businesses including CASE (coatings, adhesives, sealants and elastomers), non-wovens, laminates & films, and oil & gas.

The Performance Materials segment covers the group’s “more mature businesses”, including paper, carpet, tire cord, coated fabrics, antioxidants and reinforcing rubber.

Second quarter net sales in Specialty Solutions increased 14.4% to $121.5 million, helped by volume increases of $6.7 million, a pricing improvement of $7.5 million and currency gains of $1.2 million.

Net profit at the unit, though, fell 7.2% to $18 million due to higher raw materials costs.

Sales in Performance Materials, meanwhile, increased 4.2% to $99.8 million, on pricing increases of $15.4 million and partially offset by volume declines of $12.7 million. Foreign currency translation had a favorable impact of $1.2 million.

“Growth in coated fabrics outside of China, tire cord and antioxidants remained strong, but was not enough to offset declines including China coated fabrics, reported Omnova.

The segment's operating loss for the quarter was $8 million, compared to a prior-year operating profit of $5.2 million. This reflected the impairment charge in China, higher raw material costs and lower volumes.