Schweitzer-Mauduit Reports 2Q Profit on Reduced Costs
Aug. 4, 2010 - Schweitzer-Mauduit International, Inc. today reported second quarter 2010 earnings results for the period ended June 30, 2010.
Frederic Villoutreix, Chairman of the Board and Chief Executive Officer, commented, "We remain confident in and focused upon successfully executing our strategy to grow the high-value RTL and LIP franchises while sustaining the profitability of our base paper business. We made progress throughout the second quarter in advancing the initiatives underway to expand capacity to meet expected new demand for high-value products in Asia and Europe.
"Further, several important business fundamentals improved during the second quarter, including strong operating cash flow generation, total SWM sales volume growth, CTM profitability, cost reductions from operational performance improvement initiatives and nonmanufacturing expense reductions.
"While we remain committed to and confident in creating value for our shareholders through the growth of our high-value products and expanding our geographic reach to meet our customers' needs, for the balance of 2010 our overall financial results are difficult to project due to the uncertainties associated with pulp prices and the volatility of the U.S. dollar to euro relationship.
"Additionally, we continue to have a full agenda of major initiatives to execute, including both expansion projects and completion of restructuring actions. We are redoubling our efforts to successfully manage the full range of issues impacting our business and foresee improvement over the balance of 2010 in the unfavorable volume, pulp price and currency impacts that affected second quarter results," Villoutreix said.
"However, several operational challenges will continue into the third quarter in addition to realizing increasing start-up expenses with our new European LIP facilities," he said.
"For these reasons, coupled with the lower level of earnings per share generation during the second quarter, achievement of our previous earnings guidance of at least $4.60 per share is now unlikely. We now estimate that 2010 earnings, excluding restructuring and impairment expenses, will be at least $4.25 per share," Villoutreix concluded.
Second Quarter 2010 Results
Net sales were $182.9 million in the three month period ended June 30, 2010, a 0.2% decrease versus the prior-year quarter. Net sales decreased $0.4 million as a result of a $6.9 million sales decrease at our Malaucene facility which is no longer operating and $0.6 million in unfavorable foreign currency exchange rate impacts. These negatives were mostly offset by a $3.8 million increase in volume and $3.3 million improvement primarily from increased sales of higher priced LIP product.
Operating profit was $23.6 million in the three month period ended June 30, 2010 versus an operating profit of $12.0 million in the prior-year quarter. Excluding pre-tax restructuring and impairment expenses, operating profit would have been $27.6 million during the second quarter of 2010 compared with $25.3 million during the second quarter of 2009. The higher operating profit was primarily due to $8.5 million of benefits from cost savings programs and lower manufacturing costs, including the benefits of restructuring actions, and $1.2 million from lower nonmanufacturing expenses. These improvements were partially offset by $4.7 million in inflationary cost increases, primarily from higher wood pulp costs, $2.1 million from a less favorable product mix and $0.9 million from unfavorable currency impacts.
Operational Trends (Volume, Pricing and Cost)
During the second quarter, Schweitzer-Mauduit continued to benefit from the full conversion to LIP cigarette paper for all U.S. customers, which caused a 48% increase in sales volume of this high-value product, as compared to the prior-year quarter. For the first half of 2010, RTL sales volume is essentially flat compared to the first half of 2009, which reflects a lower rate of RTL shipments during the second quarter of this year relative to the strong first quarter primarily due to the timing of customer orders. To manage this shift in RTL demand, we partially accelerated planned third quarter capacity shutdowns at our Le Mans, France facility into the second quarter. For the full year, RTL net sales are still expected to grow year-over-year generally in-line with management's previous estimates despite the shift of RTL shipments and production among quarters.
Volume improved for traditional tobacco-related papers during the second quarter at a rate consistent with our expectations reflecting more stable demand in the North American and western European markets and completion of the transfer of cigarette paper volume to our unconsolidated joint venture, CTM.
Costs improved over the prior year despite nonrecurring operational issues associated with the transfer of LIP base paper production from our Spotswood, New Jersey facility and one-time production issues at our pulp mill in St. Girons.
CTM generated $0.7 million in income for the company during the second quarter. Cigarette paper volumes at CTM more than doubled during the quarter ended June 30, 2010 compared to the prior-year quarter.
SOURCE: Schweitzer-Mauduit International, Inc.