ARKAY Arkema (PK)

On a reported basis, the company swung to a loss in the quarter, hit by $78 million of loss on early redemption of debt and $40 million of restructuring charges. Huntsman posted a loss of $40 million (or 17 cents a share) in the quarter versus a profit of $105 million or 44 cents per share a year ago.

 

For full-year 2012, adjusted earnings were $2.25 per share, also in line with the Zacks Consensus Estimate. Profit, as reported, shot up 47% year over year to $363 million or $1.51 per share. 

 

Revenues edged down 0.5% year over year to $2,619 million in the reported quarter, yet comfortably beat the Zacks Consensus Estimate of $2,492 million. Higher sales across the polyurethanes and textile effects businesses were masked by declines across performance products, advanced materials and pigments franchises. 

 

For the full year, sales inched down 0.3% year over year to $11,187 million, but were ahead of the Zacks Consensus Estimate of $11,037 million. 

 

Revenues from Huntsman’s core Polyurethanes division jumped 13% year over year to $1,182 million driven by higher average selling prices and volume, which offset currency headwinds.

 

Performance Products segment sales fell 4% year over year to $723 million due to lower volumes and average selling prices. Lower raw material cost coupled with unfavorable currency translation led to a decline in pricing.

 

Revenues from the Advanced Materials division clipped 1% to $311 million as higher volume was offset by lower average selling prices. The company saw strong demand across the Americas, Asia Pacific and India and weakness in Europe in the quarter.

 

Textile Effects division sales rose 9% to $190 million as higher demand and improved market share led to increased volume. However, selling prices declined due to negative currency impact.

 

Revenues from the Pigments segment tumbled 28% to $286 million in the quarter, hurt by lower sales volumes and pricing. Volume declined on weak demand while unfavorable currency swings affected pricing.

 

Huntsman had cash and unused borrowing capacity of $887 million as of Dec 31, 2012, down 15% year over year. Total debt increased marginally year over year to $3,702 million at the end of 2012. The company repaid senior secured term loans worth $50 million during the fourth quarter. Total capital spending for 2012 was $412 million.

 

Looking ahead, the company expects to spend roughly $450 million on capital expenditures this year. It also sees pension expenses to rise by around $25 million in 2013. Adjusted effective tax rate is forecast to be 35%, higher than 30% in 2012. The company’s non-pigment businesses have been projected to have a record year in 2013. 

 

Huntsman currently carries a short-term (1 to 3 months) Zacks Rank #3 (Hold). 

 

Other companies in the chemical industry worth considering are Arkema S.A. (ARKAY), BASF SE (BASFY) and PetroLogistics LP (PDH). All of them retain a Zacks Rank #1 (Strong Buy).