CRANBURY, N.J., Nov. 3, 2015 /PRNewswire/ -- Innophos Holdings, Inc. (NASDAQ: IPHS), a leading international producer of performance-critical and nutritional specialty ingredients, with applications in food, beverage, dietary supplements, pharmaceutical, oral care and industrial end markets, today announced its financial results for the third quarter 2015.
Third Quarter Results
- Net sales for the third quarter 2015 of $200 million were down 4% compared to the third quarter 2014. Specialty Phosphates sales declined 2% year-over-year due to lower selling prices.
- US/Canada Specialty Phosphates sales of $146 million were down 1% compared to the prior year quarter on lower selling prices. The year-over-year selling price variance for the third quarter 2015 improved by 100 basis points compared to the first half 2015 year-over-year comparative due to price increases implemented in June.
- Mexico Specialty Phosphates sales of $40 million decreased 6% compared to the year ago period on 5% lower prices, due to increased pressures from Chinese competitors, and 1% lower volumes.
- GTSP & Other sales of $14 million were down 26% versus the prior year quarter primarily due to lower volumes but also lower prices.
- Diluted EPS for the third quarter 2015 of $0.28 included a restructuring charge of $0.29 and translation expense of $0.09. Third quarter 2014 diluted EPS was $0.83.
- During the third quarter, the Company repurchased through its enhanced buyback program 763,000 shares for $39.2 million. The Company also paid $9.3 million in dividends, returning a total of $49 million to shareholders.
Randy Gress, CEO of Innophos, commented, “As noted in our last earnings release, the 2015 margin compression led us to evaluate several initiatives to improve the overall operating performance of the organization. As a result, we took a restructuring charge of almost $9 million in the current quarter to reduce our workforce by 5%, which is expected to deliver $13 million of annual cost savings going forward. We will begin realizing some of these savings during the fourth quarter, and we expect to achieve 75% of the annualized run-rate by the start of 2016 and the full run-rate by the start of the second half 2016.”
Mr. Gress concluded, “We continued to generate solid cash flow and returned substantial cash to our shareholders, despite continued weak demand in our end markets and increased competitive pressures in certain markets that dampened our price increase implementations in others. We completed this year’s $125 million share buyback program during the quarter, buying back 10.8% of the Company’s equity during 2015, bringing the total year-to-date 2015 returns to shareholders, including dividends, to $154 million, five times our net income for the period.”
Segment Results third quarter 2015 versus 2014
Specialty Phosphates
Specialty Phosphates sales decreased 2% year-over-year due to lower selling prices, with increased pricing pressures from Chinese competitors in Latin American markets. This depression in pricing for the Mexico based business offset successful price increases implemented in the US despite the continued effects of a strong US dollar. The year-over-year price decline remains consistent with the first half of 2015 and is likely to continue in the fourth quarter. Volumes were flat year-over-year, with gains in PPA, primarily due to prior year supply issues in the US, offset by declines in technical grade STPP.
Operating income of $19 million was $10 million below the prior year period due to lower selling prices and higher raw material costs. Operating income margin was 10%, down 520 basis points compared to the same period in 2014.
US/Canada
Sales were down 1% compared to the prior year quarter on lower selling prices. Product mix was unfavorable with increases in PPA largely offset by declines in Specialty Ingredients.
Operating income of $15 million improved $2 million sequentially but was $8 million below the prior year period on lower selling prices and higher raw material costs. Geismar raw material costs in the prior year quarter were at the lowest level of any quarter in the last four years which accounted for half of the noted operating income variance. Operating income margin was 11%, up 150 basis points sequentially, but down 540 basis points compared to an exceptionally high third quarter 2014 margin.
Mexico
Mexico Specialty Phosphates sales decreased 6% compared to the year ago period on 5% lower prices and 1% lower volumes, with increased volumes in Specialty Ingredients and PPA more than offset by declines in technical grade STPP.
Third quarter 2015 operating income of $4 million was down $2 million versus the comparable 2014 quarter. Operating income margin of 10% declined 720 basis points sequentially and 410 basis points compared to the prior year quarter, both due primarily to aggressive Chinese pricing driving down selling prices, particularly in the specialty horticulture markets.
GTSP & Other
GTSP & Other sales (primarily Granulated Triple Superphosphate fertilizer co-product) were down $5 million versus third quarter 2014 on 22% lower volumes and 5% lower selling prices.
Excluding $9 million of restructuring charges recorded in “Other”, third quarter 2015 operating income of $2 million for GTSP & Other was well above break-even expectations and $1 million better than the prior year quarter. Operating income margin of 14% was up substantially from the 5% recorded in the third quarter 2014.
Recent Trends and Outlook
Total Company financial performance in the third quarter 2015, excluding restructuring charges, was consistent with each of the first two quarters of the year, recording the third straight quarter of $21 million in operating income. Improvements in US Specialty Phosphates selling prices and GTSP profitability were offset by lower operating income in Mexico Specialty Phosphates caused by lower selling prices as a result of increased pressures from Chinese competition.
Specialty Phosphates volumes overall were flat for the third quarter 2015 compared to the prior year period. A 9% increase in PPA volumes, primarily due to previous year US supply issues, was offset by a 12% decline in technical grade STPP volumes. Export sales were 1% higher than the third quarter 2014, marking the first quarter this year to show a positive variance and bringing the year-to-date variance to a 4% decline, consistent with government statistics for year-to-date overall US exports of goods and services. The Specialty Phosphates volume outlook continues to be flat for full year 2015 compared to 2014, with the fourth quarter 2015 year-over-year comparable expected to recover the year-to-date September shortfall due to low fourth quarter 2014 PPA volumes caused by supply issues during that period.
Specialty Phosphates operating income margins were 10% for the third quarter 2015, below the expected 12-13% range, due to the significant 720 basis point sequential decline in Mexico Specialty Phosphates resulting primarily from lower selling prices. Recently implemented selling price increases in the US contributed to a sequential improvement of 150 basis points in third quarter 2015 US & Canada Specialty Phosphates operating income margins. Total Specialty Phosphates operating income margins are now expected to be 11% for both the fourth quarter and full year 2015. Specialty Phosphates operating income is expected to be flat sequentially for the fourth quarter 2015, as cost savings from restructuring are expected to be offset by the effects of seasonally lower sales volumes.
Given the 2015 margin compression that the Company is experiencing, management evaluated several initiatives to improve the overall operating efficiency of the organization. As a result of this evaluation, a restructuring charge of almost $9 million was recorded in the current quarter which is expected to deliver $13 million of annual cost savings going forward.
To read full press release, please click here.
Help employers find you! Check out all the jobs and post your resume.
