Middlebury, Connecticut - Troubled speciality chemicals supplier Chemtura Corp. has reported a net loss of $737 million on sales of $690 million for the fourth quarter of 2008, and a net loss on a managed basis of $35 million.
A sharp decline in sales in November and December made Q4 "very challenging," commented Craig Rogerson, chairman, president and ceo, in Chemtura's results statement.
And the company's urethanes prepolymers business was more affected by the recession than other parts of its performance additives business, said Rogerson. "Many of the business's industrial manufacturing customers, reduced or cancelled orders as their customers started to feel the impact of the recession," he commented.
Chemtura is involved in discussions on asset sales in order to be able to pay a $370 million charge on its loans that is due in July this year. The group's urethanes business and its significant polymer additives units are not in the two units reported as being on the block.
A recent story in the South China Morning Post said two Chinese corporations were evaluating the assets that Chemtura has offered for sale.
Chemtura has not commented on the specific units for sales, but Rogerson said, "certain buyers are now working to complete their due diligence. Following this, they will submit final offers so the company can determine whether to sell and what the net proceeds might be.
Citing an "unprecedented decline in operating profitability," as Chemtura cut production to meet much lower demand, Rogerson said the net effect was "significant stress on our liquidity."
"As demand and profitability declined, it became necessary to seek relief from the two financial covenants under our senior credit facility," Rogerson continued. Chemtura's lenders responded quickly, he said, and it entered into a 90-day amendment and waiver agreement 30 Dec 2008, which expires on 30 March 2009.
Chemtura is working on reducing fixed costs and tightly managing manufacturing, said Rogerson. It is cutting its professional and administrative headcount by about 20 percent, and managing manufacturing plants on a "make-to-order" basis, said the Chemtura chief.
This gave substantial inventory reductions of $109 million or 15 percent in the quarter.
In specific businesses, revenues in Performance Specialties dropped by 8 percent or $19 million and operating profit decreased 32 percent or $11 million compared with Q4 2007. Lower sales volumes of $39 million were the main cause of the lower revenue, offset somewhat by higher selling prices of $24 million.
Chemtura said its major Polymer Additives segment "saw the greatest impact from the deepening recession," with customers shutting plants temporarily to meet reduced demand and cut inventory, Rogerson said.
Polymer Additives' revenues decreased by 35 percent or $154 million compared with Q4 of 2007, which included a $46 million reduction from the divestiture of the oleochemicals and organic peroxides businesses. Lower sales volumes of $129 million were partially offset by higher selling prices of $25 million.
Operating profit on a managed basis declined $58 million compared to the fourth quarter of 2007, resulting in an operating loss of $38 million. Some $38 million of the profit drop came from increased raw material and energy costs, $28 million from lower volume and unfavourable product mix and $14 million from increased manufacturing costs. These were partially offset by price increases of $25 million.