US Momentive wary of rising raw material costs

03 November 2010 18:06  [Source: ICIS news]

TORONTO (ICIS)--US producer Momentive Specialty Chemicals is seeing inflationary trends in methanol prices, a key raw material, and fears the possiblity of higher costs in other feedstocks, CEO Craig Morrison said on Wednesday.

“We are already seeing some inflationary trends, such as methanol, and remain vigilant for the potential [of prices increasing] in other raw materials,” Morrison told analysts during the company’s third-quarter conference call.

Momentive, which was recently renamed from Hexion Specialty Chemicals, would maintain a strong focus on passing through raw material price increases to its customers, he said.

Momentive’s raw material prices have been steadily rising since early 2009, Morrison said.

During the third quarter, Momentive saw a general uptick in its raw material pricing index.

On a year-on-year basis, raw material price increase had been “more dramatic”, with methanol prices up 45% from the 2009 third quarter, urea up 13% and propylene up 22%, Morrison said.

However, phenol prices were flat, compared with the year-earlier quarter, he added.

Earlier on Wednesday, Momentive reported that its third-quarter operating income more than doubled to $189m (€134m) from the 2009 third quarter.

The year-on-year improvement in results was driven by Momentive’s epoxy and phenolic resins business, which saw earnings before interest, tax, depreciation and amortisation (EBITDA) rise 82% to $151m from $83m in the 2009 third quarter. The segment’s sales rose 36% to $706m.

Last month, Hexion and Momentive Performance Materials – both controlled by private equity firm Apollo Global Management – completed a deal to combine their businesses, and Hexion was renamed Momentive Specialty Chemicals.

However, the two companies’ capital and legal entity structures remain separate and they continue to file separate financial reports.

($1 = €0.71)

For more on Momentive Specialty Chemicals and other producers visit ICIS company intelligence
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By: Stefan Baumgarten
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