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Calgon Carbon Misses EPS Estimate

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Calgon Carbon Corporation (CCC - Free Report) reported a profit of 9 cents per share in the fourth quarter of 2011 compared with 22 cents in the year-ago quarter. It, however, missed the Zacks Consensus Estimate of 13 cents per share. For full year 2011, the company’s earnings came in at 69 cents per share compared with 61 cents per share in 2010, missing the Zacks Consensus Estimate of 72 cents per share.


Sales in the quarter increased 15.5% to $138.2 million from $131.5 million in the year ago quarter; slightly ahead of the Zacks Consensus Estimate of $138 million. Currency translation had a positive impact of $1.3 million on sales for the fourth quarter. Calgon Carbon attributed the sales growth in the fourth quarter to higher sales from Calgon Carbon Japan (“CCJ”) and higher prices for its activated carbon and services in the U.S. and Europe. In these two regions, increase in sales in its wastewater, food, and environmental air markets were offset by a decline in sales in the respirator and potable water markets.

In the fourth quarter, sales in the Activated Carbon and Service segment increased 4.4% to $122.0 million from $116.9 million in the prior year quarter. CCJ’s sales amounted to $22.4 million, representing an increase of $3.9 million over the prior year period. Equipment segment sales climbed 10.3% to $13.9 million, but were somewhat offset by soft demand for carbon absorption equipment. Consumer segment sales were $2.2 million compared with $2.0 million a year ago. In the Consumer segment, sales of activated carbon cloth offset the effect of the final disposition of the company’s former PreZerve product line.


Cost of products sold increased 8.4% to $95.5 million in the reported quarter. Cost of products sold as a percentage of sales was 69.1 versus 67.0 in the year-ago quarter. Gross profit decreased to $42.7 million in the quarter from $43.3 million in the prior-year quarter.

Gross margin was 30.9% in the quarter versus 33.0% in the third quarter of 2010. Sales of low-margin outsourced products, particularly at CCJ, as well as expenses related to equipment failures during the start-up of the company’s new reactivation facilities in Europe and China affected the margins of the company.

Selling, administrative and research expenses for the quarter were $27.0 million, versus $21.6 million in the comparable year-ago quarter. The increase was mainly due to $2.2 million in severance expense from management changes in Europe and Asia. It also cited testing costs associated with advanced products for mercury removal as well as added staff at its Hyde Marine unit as reasons for increased expenditure.

Financial Performance

Cash and cash equivalents were $13.5 million as of December 31, 2011 compared with $34.0 million as of December 31, 2010. Long-term debt amounted to $1.1 million as of December 31, 2011 compared with $3.7 million as of December 31, 2010.


Though the company faced some challenges in the fourth quarter, it expects to continue to capitalize on its growth opportunities. The company continues to regard ballast water treatment, reactivation services, disinfection by-products, and mercury removal as the very basis for sustained growth throughout the decade.

Calgon competes with MeadWestvaco Corporation . It currently retains a Zacks #4 Rank on its stock, which translates to a short-term “Sell” rating.

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