W. R. Grace & Co. (NYSE: GRA) announced second quarter net income of $82.8 million, or $1.07 per diluted share. Net income for the prior-year quarter was $69.3 million, or $0.90 per diluted share. Adjusted EPS was $1.12 per diluted share compared with $1.14 per diluted share in the prior-year quarter. “Earnings for the quarter came in as expected,” said Fred Festa, Grace's Chairman and Chief Executive Officer. “Materials Technologies and Construction Products had solid quarters, benefiting from good growth in emerging regions and strong pricing and margins. In Catalysts Technologies, the customer operational issues that impacted the first quarter were successfully resolved. However, our refinery catalyst pricing initiative has not produced the results we wanted, with negative effects to our sales and earnings outlook in the second half.” Second Quarter Results Second quarter net sales of $802.8 million decreased 2.9 percent compared with the prior-year quarter. The decrease was due to lower pricing (-2.5 percent) and unfavorable currency translation (-1.5 percent), partially offset by higher sales volumes (+1.1 percent). Base pricing increased compared with the prior-year period, but was more than offset by lower rare earth surcharges. Gross profit of $303.3 million decreased 0.3 percent compared with the prior-year quarter primarily due to lower sales, partially offset by lower raw material and manufacturing costs. Gross margin was 37.8 percent, an increase of 100 basis points compared with the prior-year period. Adjusted EBIT of $142.1 million decreased from $143.6 million in the prior-year quarter due to lower gross profit and higher operating expenses, partially offset by higher earnings from the Advanced Refining Technologies (ART) joint venture. Adjusted EBIT margin of 17.7 percent increased 30 basis points compared with the prior-year quarter. Adjusted EBIT Return On Invested Capital was 33.6 percent on a trailing four-quarter basis, a decrease of 250 basis points from the prior-year quarter, primarily reflecting lower earnings in Catalysts Technologies for the trailing four-quarter period.
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.