US Solutia expects big profit jump in 2011 - executive

10 November 2010 22:17  [Source: ICIS news]

NEW YORK (ICIS)--US-based specialty chemicals and materials firm Solutia expects to post a big jump in earnings per share (EPS) in 2011 on strong demand and pricing strength, its top executives said on Wednesday.

Chief financial officer (CFO) James Sullivan said that for 2011, the company expects to post EPS of between $2.00-2.25 - up from an estimated range of $1.40-1.50 in 2010.

That is significantly higher than Wall Street consensus estimates of $1.70 for 2011.

Sales in 2011 are expected to rise to $2.1-2.2bn (€1.5-1.6bn) from around $1.9bn in 2010, while earnings before interest, tax, depreciation and amortisation (EBITDA) are projected to jump to $560-600m from $480-500m in 2010.

Sullivan said the estimated 9-14% gain in 2011 sales would be driven by an expected 7% increase in volumes, along with more than 2% in pricing advances and about 2% from acquisitions.

Looking at the longer term, chief executive officer (CEO) Jeffry Quinn said “the portfolio has the potential to produce $3.5bn in revenue by 2015, while growing EBITDA to over $1bn”.

The financial targets exclude any impact from acquisitions, Quinn told reporters at Solutia’s investor day.

“We believe we can raise EBITDA margins from around 26% today to 30% during this period. This is a very robust outlook, but achievable,” said Quinn.

Much of the growth would be driven by Solutia’s advanced interlayers and performance films businesses, which cater to the solar and electronics markets, Quinn said.

“However, we also will benefit from GDP-plus growth in larger businesses such as Saflex,” he added.

Solutia’s Saflex business produces polyvinyl butyral interlayers for automotive glass and building windows.

Solutia's business segments are advanced interlayers, performance films and technical specialties.

It is the top producer of polyvinyl butyral (PVB) resins for automotive and architectural glass, and solar encapsulants - the clear coating covering solar panels.

It also provides ethylene vinyl acetate (EVA)-based solar encapsulants.  The firm's technical specialties segment comprises rubber additives and heat-transfer fluids.

In terms of M&A, Solutia will continue to look for bolt-on acquisition opportunities, especially in advanced interlayers and performance films, said Quinn.

Longer term, the company could look for key integration opportunities that tie into raw materials, he added.

Shares of Solutia jumped $1.85, or 9.8%, to $20.75 on the better-than-expected guidance.

($1 = €0.72)

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By: Joseph Chang
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