Omnova improves cash flow, reduces net debt by $26.1 million in Q2

By Jennifer Lanning Drey

Portland, Ore., June 24 - Omnova Solutions Inc. improved profitability and cash flow in the second quarter, allowing the company to reduce net debt by $26.1 million and end the period with net debt of $141 million, Kevin McMullen, chief executive officer of Omnova, said Wednesday during the company's second-quarter earnings conference call.

"We remained relentless in the second quarter at driving cash flow and reducing debt by tightly managing controllable costs, working capital and interest expense," McMullen said.

The company had $46.4 million of excess credit availability at the May 31end of the second quarter, which is more than adequate to fund operations, the CEO said.

Cash on hand increased by $8.4 million during the quarter.

Second-quarter EBITDA improved to $11.5 million versus $9.7 million in the same period of 2008. The improvement, combined with the debt reduction, brought the company's ratio of net debt to EBITDA to 2.8 times at May 31 versus a limit of 5.5 times under its bank covenants.

Encouraged by results

Omnova posted net income of $5.1 million for the second quarter, compared to a net loss of $3.1 million in the comparable 2008 period. At the same time, net sales decreased $58.4 million, or 26.6%, to $161.3 million in the second quarter, compared to $219.7 million in the second quarter of 2008.

The company said the decrease in net sales was the result of lower selling prices and weak market demand, which were partially offset by market share gains and penetration into new adjacent markets.

"We are encouraged by our year-over-year improvement in the second quarter, capping off a strong first half considering the current challenging state of the economy in our markets," McMullen said.

Omnova expects to continue to be profitable and post positive cash flow from operations in the second half of the year based on recent actions, including cost reductions, pricing improvements and new product introductions, McMullen said.

The company is operating with the lowest cost structure in its history and is on track to exceed the $19 million in savings for 2009 that it had previously announced.

"Solid results under these difficult conditions demonstrate that the numerous actions we have taken to improve the company are making a difference," McMullen said.

Omnova is a Fairlawn, Ohio, provider of emulsion polymers and specialty chemicals.

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