US OMNOVA Q4 results to be hit by typhoon-related flood in China

15 November 2013 18:54  [Source: ICIS news]

HOUSTON (ICIS)--OMNOVA Solutions on Friday warned that its fiscal 2013 Q4 results will be affected by a major typhoon-related flood that hit its engineered surfaces facility in Minhang, China, last month, as well as a number of other negative developments.

The US-based producer of emulsion polymers, specialty chemicals and engineered surfaces added that while the Minhang plant had resumed operations, it would take some time to return the facility to normalised manufacturing, inventory and sales levels.

OMNOVA also said that results would be hit by “a sudden and unanticipated raw material supply disruption” at its performance chemicals operation in Ningbo, China, which forced the company to declared force majeure to customers of its antioxidant products. 

OMNOVA expects that the Ningbo facility will be manufacturing product for only two of the final seven weeks of the fiscal 2013 fourth quarter ending 30 November, “but alternative raw material supply is being secured and the company does not believe that the impact will continue into 2014,” it said.

Meanwhile, volumes and margins in OMNOVA’s paper chemicals business are lower than expected because of “slower ramp-up of new volume wins and lower pricing,” it said.

Also, OMNOVA expects raw material costs to be higher in the fourth quarter – driven by a 27% increase in butadiene – “and the company does not believe these costs will be completely passed on to customers in the quarter,” it said.

These negatives will be partially offset by a one-time gain on the sale of a previously idled plant in China, as well as by lower effective tax rates in several countries, the company said.

"While fourth quarter 2013 results are now expected to be lower than we previously forecasted, we expect them to be well above last year's fourth quarter,” said CEO Kevin McMullen.

“We continue to work on a number of key structural improvements in performance chemicals and engineered surfaces that should positively contribute to future results,” he added.

Those improvements included the recent start-up of new specialty chemicals capacity in China, a consolidation of its US emulsion polymer and engineered surfaces manufacturing operations, and “several exciting new product launches," McMullen said.

($1 = €0.74)

By: Stefan Baumgarten
+1 713 525 2653

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