17 July 2009 17:46 [Source: ICIS news]
HOUSTON (ICIS news)--The worst of the destocking that has plagued chemical companies is over, but it will take time to bring profit margins back to where they were before the recession started, Cytec Industries executives said on Friday.
Cytec CEO Shane Fleming told investors that sales volumes improved from the first quarter, but prices have sunk significantly as competitors hustle to increase market share.
“We have seen volume improvements in the past several months that we hope signal an end of destocking,” Fleming said.
Cytec, based in New Jersey, posted a second quarter net loss of $24.8m (€17.6m) as slower sales and lower prices took their toll on its bottom line.
The company warned that destocking would still be a factor for the second half of the year, but said it was seeing improved demand in Asia and North America.
Soft demand in the commercial aircraft market caused second-quarter sales at the company’s engineering chemicals segment to fall 21%, to $178.3m from $224.8m in the same period the year before. In order to deal with the slow sales, Cytec will cut its workforce in the segment by 8%, Fleming said.
Cytec’s acrylonitrile (ACN) sales volumes were up 30% over the second quarter of 2008, but sales prices fell by 64%, Fleming said.
David Begleiter, senior analyst at Deutsche Bank, backed up Cytec’s view and maintained a “buy” rating on the company’s stock.
“Signs of sequential demand improvement, alongside continued restructuring progress, bolster our confidence in a solid 2H09 recovery at Cytec,” Begleiter said in a research note.
Cytec shares on the New York Stock Exchange were $22.79 in mid-morning trading on Friday, up from $20.45 at market close on Thursday.
($1 = € 0.71)
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