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Cytec Industries Inc. Q1 2010 Earnings Call Transcript

Cytec Industries Inc. Q1 2010 Earnings Call Transcript

Cytec Industries Inc. (CYT)

Q1 2010 Earnings Call Transcript

April 23, 2010 11:00 am ET


Jodi Allen – IR

Shane Fleming – Chairman, President & CEO

Dave Drillock –VP & CFO


John McNulty – Credit Suisse

David Begleiter – Deutsche Bank

P.J. Juvekar – Citi

Mike Sison – KeyBanc

Laurence Alexander – Jefferies

Bob Koort – Goldman Sachs



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Good day, and welcome to the Cytec Industries Incorporated first quarter earnings announcement. Today's call is being recorded. For opening remarks and introductions, I would like to turn the conference over to Ms. Jodi Allen. Please go ahead.



Thank you, Jennifer and good morning everyone. We appreciate your participation in our conference call. For our call today, Shane Fleming, Chairman and President and Chief Executive Officer will provide an overview of operations and Dave Drillock, Vice President and Chief Financial Officer, will review the financial results and the special items noted in our press release.

Shane will then finish with some commentary on our outlook for 2010. This call is being webcast in listen-only mode, and it will be archived in audio format on our website for three weeks. Throughout the call, we will referencing the supporting materials, which can be downloaded from our Investor Relations website under calendar of events or you may follow the slides accompanying today's webcast, which are also available through our website.

During the course of this presentation, and in response to your questions, you will hear certain forward-looking statements. Our actual results may differ materially. Please read our commentary on forward-looking statements in slide number two of our supporting materials, or at the end of our news release, or the statements in our quarterly and annual SEC filings.

In addition, our discussions include certain non-GAAP financial measurements as defined under SEC rules. We have provided a reconciliation of those non-GAAP financial measures to the most directly comparable GAAP measure, at the end of our press release. A copy of our press release is available on our Investor Relations website.

Now, let me turn over the call to Shane.

Shane Fleming

Thank you, Jodi, and good morning everyone. Thanks for joining our first quarter conference call. I will begin on slide number three. Our positive result in the quarter reflects stronger demand coming from improvements in the global economy as well as the benefits from executing our cost reduction initiatives over the last 18 months.

We continue to see sequential sales volume growth across the chemical business which has led to significantly improved earnings results in the first quarter. I'm pleased with the start to the year as sales on the first quarter were $787 million, a 29% increase versus the prior year and a 5% sequential increase over the fourth quarter 2009.

The sales increase was driven by demand improvement across each of the chemical business segments with only engine materials experiencing weaker volumes as compared to the strong first quarter of 2009. The overall results for the quarter with net earnings $32.7 million or $0.66 per diluted share excluding the special items that Dave will explain later in the presentation.

This compares with sales of $612 million and net earnings of $2.7 million in the first quarter last year. The significant improvement in first quarter earnings results versus the beginning of 2009 was due mainly to strengthening demand in chemicals and the improved on this leverage, resulted from our focused actions to take into execute cost savings initiatives.

We are also benefiting from lower raw material cost in the quarter as much as the recent significant raw material increase and especially chemical segments only begin to roll through our income statement in the second quarter. Now I would like to provide an overview of the business segment results.

Beginning on slide number four, Coating Resins delivered sales of $341 million, a 38% increase versus the first quarter of 2009. Selling volumes were up by 42% versus the first quarter of 2009 due to the strengthening global demand over the last several quarters, as compared to a period of significant destocking in the first half of the last year.

While all regions demonstrated good demand improvement versus the prior year period; growth in Asia has been particularly strong led by recovery in automotive and industrial markets. Selling prices decreased by 9% versus the same period last year in response to competitive pressures and lower material cost in the same product, in some product areas while the impact of exchange rates increased sales by 5%.

The chart on slide five displace revenue growth in the segment, which shows sequential growth in the quarter with March sales very strong, which could signal some pretty buying prior to announced price increases going to affect in the second quarter. The Coating Resin Segment also benefited from improved margins from a structural cost reduction efforts, which positively impacted earnings this quarter.

The business continues to focus on the positive trend towards environmentally friendly technologies and I'm pleased to report that we have secured major new contracts with one of our largest global coating's customers based on our ability to deliver a broad range of value added, environmentally friendly technology.

Operating earnings for the segment were $16.8 million in the quarter, a sharp improvement versus the loss of $20.3 million in the first quarter of last year. Moving to Additive Technologies, slide number six shows sales in the segment of $52 million, an increase of 22% versus the first quarter of 2009.

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