KMG Chemicals, Inc. (NASDAQ: KMGB), a global provider of specialty chemicals in carefully focused markets, today announced preliminary earnings expectations for the fourth quarter and year ended July 31, 2011, and the scheduling of its fourth quarter and year end news release and conference call.
Neal Butler, President and CEO of KMG, stated, “We achieved record revenues in the fiscal 2011 fourth quarter, representing an approximate 14% increase over the fiscal 2011 third quarter. However, we anticipate fourth quarter net income will be about half the net income of $2.6 million, or $0.23 per diluted share, reported in the third quarter of fiscal 2011. Despite the decline in income, we are optimistic as we enter fiscal 2012.
“Fourth quarter operating profits in our Electronic Chemicals segment were well below expectations, with most of the shortfall due to raw material cost increases and certain extraordinary integration costs associated with the completion of the consolidation of our manufacturing sites. With this consolidation completed, our operations team has been successful in reducing plant related costs, with the full benefit of these reductions to be realized in fiscal 2012.”
Mr. Butler continued, “Pricing actions were implemented in the third and fourth quarters to capture the raw material cost increases incurred earlier in the year; however, these costs continued to escalate unexpectedly through the fourth quarter, pushing our pricing strategy about one quarter behind schedule. Historically, we have been able to fully recover cost increases within a reasonable period; however, as previously reported, we postponed necessary price increases to ensure a smooth and complete requalification process by our customers of the products impacted by our plant consolidation initiative. This strategy was successful, as we maintained virtually all of the pre-integration sales volumes of these products. Our pricing strategy is in place to capture all of those cost increases and we expect to return to normalized margins early in fiscal 2012.