Solutia posts second quarter results
Solutia's operations for the second quarter versus the year-ago period were negatively impacted by elevated raw material and energy costs, increased interest expense and severance costs associated with workforce reductions, offset to some extent by higher sales prices, favorable currency exchange rate fluctuations and improved manufacturing operations, according to the company.
The second quarter net loss included charges of approximately $7 million after tax resulting from several events. The company eliminated approximately 280 positions during the quarter, incurring severance charges of $5 million after tax. In addition, the Flexsys and Astaris joint ventures, in which the company has a 50 percent ownership stake, incurred restructuring charges during the quarter. Solutia's share of these charges was approximately $2 million after tax.
For the first half of 2003, Solutia's net loss from continuing operations was $38 million, or 36 cents per share, on net sales of $1,207 million. Continuing operations for the first half of 2003 included net charges of $16 million after tax for several items, such as restructuring charges primarily related to workforce reductions of approximately 450 positions, and restructuring charges at the Flexsys and Astaris joint ventures. These charges were partially offset by a gain from the recovery of a previously written off uncollectible Russian customer account. This compares to income from continuing operations for the first half of 2002 of $15 million, or 14 cents per share, on net sales of $1,105 million.
Earnings from continuing operations for the first half of 2002 included a gain of $3 million after tax from the sale of Solutia's interest in the Advanced Elastomer Systems joint venture. The decline in earnings for the first half of 2003 was due to elevated raw material and energy costs, increased interest expense and severance costs associated with workforce reductions, offset to some extent by higher sales prices, favorable currency exchange rate fluctuations and improved manufacturing operations.
For the first half of 2003, Performance Products and Services net sales increased $35 million over the comparable prior year period primarily due to favorable currency exchange rate fluctuations. Segment profitability declined by $1 million primarily because of severance charges associated with workforce reductions and increased raw material costs, partially offset by increased sales.
Integrated Nylon's net sales for the second quarter of 2003 increased $10 million compared to the second quarter of 2002 driven by improved sales prices, which more than offset volume declines. Price increases occurred principally in nylon intermediate chemicals. In addition, carpet fibers recorded improvements in average selling prices following an April 1 price increase.
Sales volumes were down considerably in the acrylic fiber business reflecting weakness in the U.S. textiles industry. Carpet volumes were down modestly in line with industry trends. Integrated Nylon's segment profitability decreased $30 million over the prior year quarter. This was primarily due to higher raw material and energy costs of approximately $50 million and severance charges driven by cost reduction initiatives incurred in the quarter, partially offset by higher net sales, Solutia said.
For the first half of 2003, Integrated Nylon's net sales increased $67 million over the comparable prior year period because of higher average selling prices. Segment profitability declined by $48 million primarily because of higher raw material and energy costs of approximately $110 million and severance charges associated with cost reduction initiatives, partially offset by increased sales.
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