Specialty materials and chemicals company Cytec Industries Inc. said that it is implementing cost-cutting measures in its struggling Industrial Materials segment which is grappling with weak demand. The move is intended to address the current challenging market conditions, improve profitability of the unit and better place the company for growth.
As part of the move, Cytec will immediately cut headcount by roughly 55 people through modification of shift patterns within various operations, centralization of logistics and planning activities and shut down of a small site in Germany.
Cytec sees annual cost savings of $5.5 million, which is expected to materialize in the second quarter of 2014. The company is expected to take a pre-tax restructuring charge roughly $2 million in third-quarter 2013, primarily associated with severance costs. Additional restructuring charges are expected to occur next year.
Cytec reported its second-quarter 2013 results last month. The company recorded adjusted (excluding special items) earnings from continuing operations of $1.51 per share, topping the Zacks Consensus Estimate of $1.27. Consolidated profit, as reported slipped roughly 15% year over year to $34.6 million or 83 cents per share, hurt by loss on sale of coating resins business.
Revenues (from continuing operations) jumped roughly 27% year over year to $514 million in the reported quarter on healthy performance across Cytec’s Aerospace Materials and In Process Separation units. It beat the Zacks Consensus Estimate of $505 million.
Double-digit growth in the aerospace business was driven by higher large commercial aircraft build rates. Strong demand for mining products boosted results in the In Process Separation division. However, the company recorded lower-than-expected sales in the Industrial Materials segment as weak European demand hurt sales of structural materials to the high performance automotive and motorsports markets.
Cytec, in April 2013, closed the divestiture of its coating resins business to leading private equity firm, Advent International, for roughly $1.13 billion. The business has been classified as discontinued operation. Cytec is using the proceeds from the sale to fund its share buyback program.
During the second quarter, Cytec tweaked its method of accounting for its continuing pension and other postretirement benefit plans to a more preferable mark-to-market (MTM) method. Factoring in the impact of the pension accounting change and other post retirement benefits, additional stranded costs and share buybacks, Cytec cut its adjusted earnings per share estimate for 2013 to a range of $4.70 to $4.90 per share from its previous guidance of $4.97 to $5.22.
Cytec currently maintains a Zacks Rank #2 (Buy).
Other companies in the chemical industry with favorable Zacks Rank are Northern Technologies International Corp. , Eastman Chemical Co. (EMN - Free Report) and PPG Industries Inc. (PPG - Free Report) . While Northern Technologies retains a Zacks Rank #1 (Strong Buy), both Eastman Chemical and PPG carry a Zacks Rank #2 (Buy).