W.R. Grace sees $69.3 million second-quarter income; sales unchanged

By Caroline Salls

Pittsburgh, July 25 - W. R. Grace & Co. posted second-quarter net income of $69.3 million, or $0.90 per diluted share, compared with $75.8 million of net income for the second quarter of 2011, or $1.00 per diluted share, according to a company news release.

Net income for the six months ended June 30 was $130.2 million, or $1.70 per diluted share, compared with $130.0 million of net income, or $1.72 per diluted share, for the same period of last year.

"I am pleased with our performance this quarter, particularly our overall pricing and volume growth, and the sequential margin improvements we targeted and achieved in our materials technologies and construction products operating segments," Grace chairman and chief executive officer Fred Festa said in the release.

"Despite renewed headwinds from Europe, we affirm our outlook for adjusted EBIT. We remain confident in our ability to move our business forward and we are prepared to deliver another year of solid earnings growth."

Sales results

The company said second-quarter sales of $826.7 million were unchanged from the second quarter of 2011 as improved base pricing and higher sales volumes were offset by unfavorable currency translation and lower rare earth surcharges.

Meanwhile, sales for the six months ended June 30 increased 3.9% to $1.58 billion.

W.R. Grace said sales in emerging regions represented 36.3% of sales and grew 13.3% compared with the three months ended June 30, 2 011.

EBIT, cash

Adjusted EBIT of $143.6 million increased 8.1% compared with $132.8 million in the 2011 second quarter. The company said the increase primarily resulted from higher segment operating income in construction products, lower incentive compensation expense and lower corporate expenses driven by expense control efforts and previously announced restructuring initiatives.

Grace reported $115.1 million of net cash provided by operating activities for the six months ended June 30, up from $72.3 million at June 30, 2011. The improved cash flow primarily stemmed from lower pension contributions and improved working capital performance.

2012 outlook

As of Wednesday, the company said it affirmed its outlook for 2012 adjusted EBIT in the range of $510 million to $530 million, up 6% to 11% from 2011 adjusted EBIT of $478.6 million. Grace said it expects 2012 adjusted EBITDA in the range of $630 million to $650 million.

The following updated assumptions are components of Grace's 2012 outlook:

• Consolidated sales in the range of $3.1 billion to $3.2 billion, reflecting improved sales volumes and base pricing, offset by lower rare earth surcharges and unfavorable currency translation of about $175 million and $125 million, respectively;

• Consolidated gross margin in the high end of the 35% to 37% target range with raw material inflation expected to moderate in the second half of 2012;

• An average euro exchange rate of $1.22 for the remainder of the year, compared with an average of $1.38 for the second half of 2011;

• Pension expense of roughly $72 million for the full year, compared with $63 million for 2011; and,

• An effective tax rate of 33.5% and a cash tax rate of 14.0%.

The company said it continues to project an atypical quarterly earnings pattern for the year and now expects the third quarter to be weaker than the second and fourth quarters.

W.R. Grace, a Columbia, Md.-based specialty chemicals company, filed for bankruptcy on April 2, 2001 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 01-01139.

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