FAIRLAWN, Ohio, Aug. 30, 2011 /PRNewswire/ -- OMNOVA Solutions (NYSE: OMN) today announced that the Company is revising its 2011 full year adjusted earnings estimate. OMNOVA now expects adjusted diluted earnings per share for the fiscal year ending November 30, 2011 to be between $0.40 and $0.44, as compared to its prior estimate of approximately $0.60 provided during its second quarter earnings call in June.
The updated estimate reflects a reduction in market volumes resulting from a deceleration in the global economy in the third quarter, as well as the rapid escalation in raw material costs to unprecedented highs. These conditions are expected to continue to be dynamic in the fourth quarter.
"The global economy has recently slowed and become more uncertain and, as a result, demand across many OMNOVA markets has weakened," said Kevin McMullen, OMNOVA Solutions' Chairman and CEO. "At the same time, despite the recent drop in oil prices, the costs for key raw materials such as butadiene and many acrylics have continued to rise to record levels."
Second half 2011 volumes in Performance Chemicals are expected to be down 4-5%, as compared to 2010, driven primarily by weaker paper and carpet markets. This compares to flat year-over-year volumes during the first half of 2011. The Company does not believe there has been any significant loss of market share in 2011. Second half 2011 Decorative Products volumes are expected to be down 10-12% as compared to a year ago, driven primarily by lower global market demand for coated fabrics. Full year 2011 raw material inflation is now expected to increase by a record amount of approximately $140 million for the OMNOVA legacy (excluding ELIOKEM) business as compared to a year ago. This exceeds last year's record inflation by almost $45 million. Pricing actions are expected to total $130 million in 2011 - a record increase - but still lag the raw material inflation primarily due to timing in index contracts. Historically, operating profit has improved as raw material costs have stabilized or declined, and contracts with index pricing mechanisms have had time to catch up."While we face near-term profit headwinds, we remain encouraged by the long-term earnings prospects of OMNOVA as we continue to take actions to improve our earnings capability," said McMullen. "In particular, we are making significant progress in Performance Chemicals' integration of our ELIOKEM acquisition, building on our manufacturing footprint and new technology offerings. For example, a key global specialty chemical initiative is the production ramp-up at our new specialty latex facility in Caojing, China. Despite the record cost inflation and weaker volumes, Performance Chemicals is expected to have its second highest pro forma annual operating profit in its history." OMNOVA Solutions plans to announce results for the third quarter ending August 31, 2011 on September 27, 2011. Company management will conduct its third quarter earnings call on Wednesday, September 28, 2011 at 11:00am ET. This Earnings Release includes adjusted diluted earnings per share which is a non-GAAP financial measure as defined by the Securities and Exchange Commission. This adjusted financial measurement is not a measurement of financial performance under GAAP and such financial measure should not be considered as an alternative to diluted earnings per share determined in accordance with GAAP. Because of the forward looking nature of this financial measure, it is not practical to present a reconciliation to the GAAP measure.