26 February 2009 16:52 [Source: ICIS news]
TORONTO (ICIS news)--Chemtura expects to incur another operating loss in the first quarter but it sees improvement in some of its business lines in the second quarter, the US specialty chemicals producer said on Thursday.
“Demand is not going to recover quickly, and we will likely incur another operating loss in the first quarter,” CEO Craig Rogerson said during a webcast analysts' briefing.
Chemtura recorded a $726m (€574m) operating loss in the fourth quarter.
“It will be no surprise to you when I say that the first quarter will be a difficult quarter as well,” he added.
However, the second quarter should show seasonal growth in Chemtura’s crop protection and consumer products businesses, Rogerson said.
“Theses businesses are less exposed to the macro economy and should demonstrate sequential revenue and earnings growth and generate cash as the year progresses,” he said.
With the exception of these two businesses, Chemtura was managing its plants on a “make-to-order” basis, targeting further inventory reductions although at a slower rate than in the fourth quarter, he added.
Rogerson also said that Chemtura was making progress on its plans to sell some assets to help repay debt, in particular $370m in notes due to mature in July.
“We have been working on multiple sales options and I can confirm that the asset sales process is progressing,” Rogerson said.
Certain buyers were now working to complete due diligence, Rogerson said but did not disclose names or expected proceeds.
But while Chemtura was lucky to have assets that attracted buyer interest even in the current tough times, there was no guarantee that a sale could be completed until a definitive agreement had been concluded and a sale closed, he said.
As for capital expenditure, Chemtura was restricting spending to about $60m this year, compared with $121m it spent in 2008, he said.
Commenting on the $665m goodwill impairment charge Chemtura took in the fourth quarter, chief financial officer Steven Forsyth said it was tied to the company’s polymer additives and consumer products business.
The sharp sales decline in polymer additives as the recession took hold in the fourth quarter, and projections of a weak 2009, prompted Chemtura to write down that business’ goodwill, he said.
The write-down in the consumer products business was prompted by higher discount rates due to changes in capital markets, Forsyth said.
The write-downs would help align the value of Chemtura’s business with its stock price, Forsyth added.
The company's share price fell 29% to 41 cents in Thursday morning trading in New York
The company warned last week that the stock was in danger of being de-listed from the New York Stock Exchange as it continued to trade below $1 for 30 consecutive days.
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