W. R. Grace & Co. (NYSE: GRA) announced second quarter net income of $69.3 million, or $0.90 per diluted share. Net income for the prior-year quarter was $75.8 million, or $1.00 per diluted share. Adjusted EPS of $1.14 per diluted share increased 2.7 percent from $1.11 per diluted share for the prior-year quarter. Net income for the six months ended June 30, 2012, was $130.2 million, or $1.70 per diluted share, compared with $130.0 million, or $1.72 per diluted share for the prior-year period. Adjusted EPS of $2.02 per diluted share increased 7.4 percent from $1.88 per diluted share for the prior-year period. “I am pleased with our performance this quarter, particularly our overall pricing and volume growth, and the sequential margin improvements we targeted and achieved in our Materials Technologies and Construction Products operating segments,” said Fred Festa, Grace’s Chairman and Chief Executive Officer. “Despite renewed headwinds from Europe, we affirm our outlook for Adjusted EBIT. We remain confident in our ability to move our business forward and we are prepared to deliver another year of solid earnings growth.” Second Quarter Results Second quarter sales of $826.7 million were unchanged compared with the prior-year quarter as improved base pricing (+4.7 percent) and higher sales volumes (+2.7 percent) were offset by unfavorable currency translation (-4.3 percent) and lower rare earth surcharges (-3.1 percent). Sales in emerging regions represented 36.3 percent of sales and grew 13.3 percent compared with the prior-year quarter. Gross profit of $304.1 million was unchanged compared with the prior-year quarter as improved pricing and productivity were offset by higher raw material costs and higher manufacturing costs. Gross margin of 36.8 percent decreased 10 basis points compared with the prior-year quarter and increased 10 basis points sequentially from the 2012 first quarter. Adjusted EBIT of $143.6 million increased 8.1 percent compared with $132.8 million in the prior-year quarter. The increase primarily was due to higher segment operating income in Construction Products, lower incentive compensation expense and lower corporate expenses driven by expense control efforts and the previously announced restructuring initiatives. Adjusted EBIT margin improved to 17.4 percent compared with 16.1 percent in the prior-year quarter.
Jefferies analysts note that recent construction spending data indicates a cycle rotation away from construction-exposed names and toward industrial- and durable goods-levered firms could be playing out.