Cytec Reports Improvements in First-Quarter 2011 as Aircraft, Resin Markets Strengthen

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Researched by Industrial Info Resources (Sugar Land, Texas)--Specialty chemicals and materials company Cytec Industries Incorporated (NYSE:CYT) (Woodland Park, New Jersey) reported strong results for the first quarter of 2011, as higher volumes and an improving market resulted in sales gains in all of the company's major businesses, particularly in the Engineered Materials segment. Net income was reported to be $83.2 million, compared with $24.8 million in first-quarter 2010.

Net sales stood at $766 million, an 18.48% increase from the same period last year. The Engineered Materials segment benefited from stronger build rates in large commercial aircraft, business jet and rotorcraft markets, while the Coating Resins segment saw improved demand from powder and waterborne resins, and the In-Process Separation segment saw improved demand from mining chemicals. Cytec officials also attributed quarterly gains to price increases that were made in response to significantly higher raw material costs. However, earnings in the Additive Technologies segment were offset by higher manufacturing costs.

"Overall, I'm pleased with our first-quarter results, given the tremendous pressure in the raw-material environment," said Shane Fleming, the chairman, president and chief executive officer of Cytec, in a conference call. "We strive to grow the top line with our more value-added and higher-performing technologies, and we will continue to make progress reshaping the portfolio to achieve a greater portion of our sales and earnings from our strategic growth platforms as we drive organic growth."

All four of the company's segments saw improved sales, while the Additive Technologies segment was the only one to see a decline in operating earnings:

• The Coating Resins segment saw $403.6 million in sales, an 18.22% increase from first-quarter 2010, and $18.8 million in operating earnings, an 11.9% increase.
• The Additive Technologies segment saw $67.7 million in sales, an 8.15% increase from the same period last year, and $8 million in operating earnings, a 4.76% decrease.
• The In-Process Separation segment saw $78.4 million in sales, a 20.43% increase from first-quarter 2010, and $16.4 million in operating earnings, a 10.07% increase.
• The Engineered Materials segment saw $216.6 million in sales, a 21.89% increase from the same period last year, and $26.7 million in operating earnings, a 27.14% increase.

Cytec officials acknowledged that raw material costs are likely to continue rising for the remainder of the year, resulting in higher prices. However, they expect the economic recovery to continue, and believe the company will build on its performance in the first quarter. The officials also acknowledged that they are not satisfied with the profitability in the Coating Resins segment, and are planning to implement changes in the second quarter to strengthen earnings.

"We expect the improved demand environment to continue at a slow and steady pace through the rest of the year," Fleming said in the conference call. "Many of our key raw materials are derivatives of propylene. The recent trends of rapidly increasing energy costs and challenges in the petrochemical industry continue to significantly impact propylene and its downstream products. We therefore expect raw material costs to remain a headwind. Demand for propylene derivatives is expected to outpace new supply, and as a result, we believe supply will remain tight and raw material prices will continue their steep upward trends. We will continue to aggressively seek price increases to mitigate the impact of the higher costs across all of our impacted product lines."

Industrial Info is tracking 22 active Cytec projects worldwide that are worth a total of more than $318 million, including a $1 million maintenance turnaround at a polyester resins plant in North Augusta, South Carolina. The project involves maintenance and repairs to an acrylate monomers production area, as well as supporting equipment and utilities, to maintain plant efficiency. For more information, visit Industrial Info's North American Chemical Processing Plant Database.

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