16 January 2009 15:56 [Source: ICIS news]
TORONTO (ICIS news)--US specialty chemicals producer Lubrizol has cut its 2008 profit guidance to reflect weaker demand for its products in the fourth quarter and expects to report $356m (€271m) in pre-tax restructuring and impairment charges, the company said on Friday.
“We were not immune to the significant economic weakness and inventory destocking that affected our industry, as well as many others in the fourth quarter,” Lubrizol CEO James Hambrick said.
The company cut its earnings guidance to $4.09 per diluted share, excluding restructuring and impairment charges. Its previous guidance from October was $4.43-4.58. Comparable earnings for 2007 were $4.06 per share.
Lubrizol also said it expected to take pre-tax restructuring and impairment charges of $356m for 2008, mainly related to goodwill impairment in its performance coatings and engineered polymers product lines.
The goodwill impairment reflected an increase in Lubrizol’s cost of capital since 2007, which was mainly due to the significant deterioration in the capital markets in the 2008 fourth quarter and the decline in the market value of the company’s own equity and debt, Hambrick said.
“The cost of capital is used to discount future cash flows and so is a key assumption used in estimating the fair value of a business,” he said.
In addition, the impairment charges reflected the difficult near-term earnings outlook in the performance coatings and engineered polymers product lines, he said.
Hambrick said Lubrizol was taking “aggressive cost reduction initiatives” as it responded to the tough economic environment.
The company was aiming to reduce costs by $40m-50m in 2009 and expected to lower capital expenditure by about $30m, compared with last year, he said.
Lubrizol is due to release its fourth-quarter and full-year 2008 results on 5 February.
The company’s shares were up 0.51% to $35.75 in early morning trading in ?xml:namespace>
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