A. Schulman Inc. (SHLM) recently posted a fiscal 2010 second-quarter net loss of $6.8 million, compared to a loss of $10.5 million in the year-ago quarter. Excluding special items, adjusted earnings per share came in at 12 cents, missing the Zacks Consensus Estimate by 11 cents as increased raw material costs exerted pressure on margins.
A. Schulman is an international supplier of high-performance plastic compounds and resins. These materials are used in a variety of consumer, industrial, automotive and packaging applications. The company is engaged in three types of business, including engineered plastics, master batch and distribution services. It employs about 2,200 people across 17 manufacturing facilities in North America, Europe and Asia.
Akron, OH-based A. Schulman’s sales grew 21.4% to $331.0 million from $272.6 million in the prior year quarter. The growth was primarily driven by higher pricing and favorable foreign currency translations. In terms of regions, sales in Europe rose 24.5% year over year to $247.4 million. Sales in North America and Asia grew by 6.5% and 60.3%, respectively, to $69.2 million and $14.4 million.
A. Schulman’s gross profit surged by 75.4% year over year to $51.3 million, while gross margin expanded by 480 basis points (bps) to 15.5%. The growth was mainly attributable to management initiatives to drive higher margin businesses and reduce costs, partially offset by increased raw material costs. Selling, general and administrative expense increased 9.7% to $48.8 million. However, higher sales and robust gross profit more than offset the increase in operating expenses. Consequently, the company swung to an operating income (calculated as gross profit less selling, general and administrative expenses) of $2.6 million, compared to an operating loss of $15.2 million in the year-ago period.
A. Schulman ended the quarter with cash and cash equivalents of $215.6 million, compared to $141.3 million in the year-ago period. During the first-half of the current fiscal year, the company generated $8.1 million of cash from operations and raised $10.0 million from borrowings, while it deployed $8.6 million towards capital expenditure and $8.0 million towards dividend payments.
Looking ahead, A. Schulman anticipates gradual improvement in the second-half of 2010 driven by better performance in both Europe and North America. Meanwhile, the Zacks Consensus Estimate on the company’s earnings for the fiscal year ending August 2010 is currently pegged at $1.84 per share, which has remained constant over the past 2 months. For the next fiscal year, the Zacks Consensus Estimate has moved up by 4 cents over the past month to $2.03 per share, as 1 of 4 covering analysts revised higher.
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