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|KMG Chemicals Reports First Quarter 2013 Financial Results|
HOUSTON--()--KMG Chemicals, Inc. (NYSE: KMG), a global provider of specialty chemicals in select markets, today announced financial results for the fiscal 2013 first quarter ended October 31, 2012.
2013 First Fiscal Quarter Highlights
Neal Butler, President and CEO of KMG, commented, "Our first quarter results underscore the progress we have made in integrating and optimizing acquired assets within our Electronic Chemicals business. Electronic Chemicals segment operating margins improved 280 bps from the fourth quarter of 2012 and 590 bps from last year's first quarter. Although our Wood Treating Chemicals business experienced a challenging first quarter, increased profitability within our Electronic Chemicals segment helped drive solid earnings per share growth on a year-over-year basis."
Electronic Chemicals sales increased 2.9% year/year to $39.5 million in the fiscal first quarter of 2013, but declined 8.2% from $43.1 million in the fourth quarter of fiscal 2012. Overall demand for KMG's high purity electronic chemicals softened in the first quarter, as semiconductor manufacturers curtailed production in response to weakening global economic conditions.
Segment operating margins improved strongly on a sequential and year/year basis, reaching 12.8% in the first quarter of 2013 compared to 10.0% in the fourth quarter of fiscal 2012 and 6.9% in the first quarter of fiscal 2012. The improvement in operating profitability from the prior year is primarily related to the realization of previous pricing adjustments that were implemented in response to prior raw material cost increases.
Wood Treating Chemicals
Wood Treating Chemicals sales declined to $25.7 million from $33.2 million in the first quarter of 2012, reflecting lower volumes, but increased from $24.3 million in the fourth quarter of fiscal 2012. The decline in first quarter volumes relative to last year's first quarter is primarily attributable to increased competitive pressures from alternative processes and materials in the rail tie treating market.
Wood Treating Chemicals segment operating margins decreased to 13.1% in the first quarter, from 15.7% in the first quarter of fiscal year 2012, but were essentially flat from 13.2% in the fourth quarter of fiscal 2012. While margins declined on a year/year basis, the impact from lower volumes was mitigated by continued sales strength in our pentachlorophenol (penta) product line, which continues to benefit from market demand for mid-level transmission poles.
Balance Sheet and Cash Flow Overview
John V. Sobchak, CFO of KMG, said, "KMG paid down $2 million in debt in the first quarter of fiscal year 2013, ending the quarter with long-term debt of $22 million. We have reduced our long-term debt by 50% over the past twelve months, resulting in long-term debt-to-shareholders' equity of 19.7% as of October 31, 2012. KMG continues to maintain strong financial flexibility, with $58 million in available credit under our current revolving credit facility. Our cash flow remained solid, as KMG generated net cash from operating activities of $6.3 million in the fiscal first quarter."
Commenting on the outlook, Mr. Butler said, "We expect demand for our electronic chemicals products to further decline in the second quarter as reported global semiconductor production slows from first quarter levels before strengthening in the second half of fiscal year 2013. Lower sales and production levels will also cause a decline in that segment's second quarter operating margins. In our Wood Treating Chemicals segment, we anticipate that second quarter sales volumes will decline from first quarter levels before strengthening in the second half of fiscal year 2013. These challenging economic conditions will likely cause our second quarter diluted earnings per share to be essentially in line with, or slightly below, last year's second quarter with expected improvement in the third fiscal quarter."
Mr. Butler concluded, "Despite near-term challenges, we are optimistic on the outlook for fiscal 2013 and beyond given the opportunities that lie ahead. Backed by our strong balance sheet, we continue to pursue accretive acquisition opportunities, including the establishment of a new market platform by the end of fiscal 2014. We remain committed to generating long-term shareholder value through our proven consolidation strategy."
The conference call will also be webcast live via the "Investors" section of the Company's website at http://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 KMG website. A telephone replay of the call will also be available for one week, starting at 11:00 a.m. ET on December 7, 2012. To access the call, dial 888-286-8010 or 617-801-6888 using participant passcode 32793961.
KMG Chemicals, Inc., through its subsidiaries, produces and distributes specialty chemicals to select 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 electronic and industrial wood treatment chemical markets. For more information, please visit the Company's website at http://kmgchemicals.com.
The information in this news release includes certain forward-looking statements that are based upon assumptions that in the future may prove not to have been accurate and are subject to significant risks and uncertainties, including statements as to the future performance of the company. Although the company believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct. Factors that could cause results to differ include, but are not limited to, successful performance of internal plans, product development acceptance, the impact of competitive services and pricing and general economic risks and uncertainties.
KMG Chemicals, Inc.