Financial Release
Kraton Announces Third Quarter 2007 Results
Total Revenue Increased 1% to $290 million
LTM Adjusted Bank Covenant EBITDA at $104 million
Term Loan Prepayment of $40 million
HOUSTON, TX. – November 13, 2007 – Kraton Polymers LLC (Kraton), a leading global engineered polymer company, announces its financial results for the quarter and nine months ended September 30, 2007. Total Revenues for the quarter were $290 million compared to $288 million in the comparable period of 2006, an increase of 1%. This increase was driven by product price increases and strengthening of foreign currencies partially offset by lower sales volumes and lower by-product sales. Through the first nine months of 2007, Total Revenues grew 4% to $832 million.
Gross Profit for the quarter decreased 25% to $46 million, as compared to $62 million in the comparable period of 2006 as higher monomers and plant restructuring costs offset the benefits of higher revenues. Gross Profit for the first nine months decreased $37 million to $130 million.
EBITDA for the quarter decreased 31% to $26 million from $37 million in 2006. First nine months EBITDA declined $28 million to $63 million.
Last Twelve Months (LTM) Adjusted Bank Covenant EBITDA, a measure used to determine compliance with our debt covenants, totaled $104 million, a decrease of $10 million from the period ended June 30, 2007. A reconciliation of Net Income to EBITDA and Adjusted Bank Covenant EBITDA is attached.
Net Loss for the quarter was $0.8 million, compared with Net Income of $12 million in the comparable period of 2006. During the first nine months of 2007, Net Loss was $8 million versus a Net Income $22 million for the same period of 2006.
"In the third quarter, we were disappointed by the volume declines we saw in our Paving and Roofing end use market due to lower market demand driven primarily by poor weather in our North American market and lower government spending. Outside of Paving and Roofing however, we were pleased that our core product volume experienced 6% growth versus last year," said George B. Gregory, President and Chief Executive Officer. "The price increases we implemented in the quarter only partially offset variable cost increases. In response to lower margins, we are reviewing further price increases to keep pace with increasing raw material and energy costs and are accelerating cost reduction programs. As always, we remain committed to providing our customers with the highest valued products and service in the industry."
Quarterly Business Developments:
- Achieved 6% core volume growth outside of Paving & Roofing.
- Implemented SBS price increases in Europe and North America.
- Finalized actions for closure of the SIS unit at the Pernis, Netherlands plant, generating expected cost savings of $6-$9 million annually.
- Pre-paid $40 million of term debt.
- Grew innovation-based volumes by 114%.
- Generated $32 million incremental cash from working capital versus 3rd quarter 2006.
Kraton has scheduled an investor and analyst conference call for Wednesday, November 14, 2007 to discuss the results of today's earnings announcement. The call will begin at 2:30 p.m. central time, 3:30 p.m. eastern time. To listen to the conference call and view the slide presentation, which will be broadcast live over the Internet, go to Kraton’s website at www.kraton.com, click on Investor Relations and then go to Presentations and Papers and select “Third Quarter 2007 Earnings Presentation Webcast.” You may also listen to the analyst conference call by telephone by contacting the conference call operator 5-10 minutes prior to the scheduled start time and asking for the "Earnings Conference Call". US Dial-In #: (888) 809-8969 or International Dial-In #: (210) 234-0001. For those unable to listen to the live call, a replay will be available 24 hours a day beginning at approximately 6:00 p.m. CT November 14th through 5:00 p.m. CT on November 28th. To hear a telephonic replay of the call, dial (866) 383-3011 or (203) 369-0381 for international callers. To hear a replay of the call over the Internet, please click here.
About Kraton
Kraton is a leading global engineered polymer company and, we believe, the world’s largest producer of styrenic block copolymers (SBCs), a family of products whose chemistry was pioneered by us over forty years ago. SBCs are highly-engineered thermoplastic elastomers, which enhance the performance of numerous products by delivering a variety of attributes, including greater flexibility, resilience, strength, durability and processability. Kraton polymers are used in a wide range of applications including adhesives, coatings, consumer and personal care products, sealants, lubricants, medical, packaging, automotive, paving, roofing, and footwear products. Kraton has the leading position in nearly all of its core markets and is the only producer of SBCs with global manufacturing capability. Its production facilities are located in the United States, Germany, France, The Netherlands, Brazil, and Japan.
Kraton, the Kraton logo and design, and “Giving Innovators their Edge” tagline are trademarks of Kraton Polymers LLC.
Forward Looking Statements
This press release includes “forward-looking statements” as that term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements and are often characterized by the use of words such as “believes,” “expects,” “estimates,” “projects,” “may,” “will,” “intends,” “plans” or “anticipates,” or by discussions of strategy, plans or intentions. In this press release, forward-looking information relates to covenant compliance, pricing trends, cost savings, production rates and other similar matters. All forward-looking statements in this press release are made based on management’s current expectations and estimates, which involve risks, uncertainties and other factors that could cause results to differ materially from those expressed in forward-looking statements. Among these factors are changes in overall economic conditions, the cyclical nature of the chemical industry, changes in demand for our products, changes in inventories at our customers and distributors, technological and product development risks, availability and cost of raw materials, competitors’ actions, pricing and gross margin pressures, loss of key customers, order cancellations or reduced bookings, the timing and cost of planned capital expenditures, changes in manufacturing yields, control of costs and expenses, significant litigation, risks associated with acquisitions and dispositions, risks associated with our substantial leverage and restrictive covenants in our debt agreements, risks associated with our international operations, the threat or occurrence of international armed conflict and terrorist activities both in the United States and internationally, risks and costs associated with increased and new regulation of corporate governance and disclosure standards (including pursuant to Section 404 of the Sarbanes-Oxley Act of 2002), and risks involving environmental or other governmental regulation. Readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update such information.
