By Jamie Smith Hopkins, The Baltimore Sun
5:29 PM EDT, October 24, 2012
Chemical maker W.R. Grace & Co. said Wednesday that its third-quarter profit fell 7.1 percent to $75.5 million as revenue shrank, in part due to unfavorable exchange rates.
The Columbia-based firm's revenue dropped 10.1 percent to $776.6 million in the three months ending Sept. 30. Sales retrenched in all of Grace's product segments: catalysts technologies — used by oil refineries and other industrial customers — as well as materials technologies and construction products.
Sales volume actually increased slightly, as did base pricing, but differences in exchange rates and a decline in what it can charge for rare earth elements outweighed those improvements, the company said. The dollar's value in the third quarter was up over a year earlier compared with the euro and the Brazilian real.
In 2011's third quarter, Grace earned $81.3 million on sales of $864.2 million.
The company tightened its earnings outlook for the year, setting expectations at $510 million to $520 million, rather than its earlier $510 million to $530 million range.
Grace focuses on earnings adjusted for such expenses as bankruptcy and asbestos-related costs — the company has been in Chapter 11 bankruptcy protection since 2001 as a result of asbestos-related lawsuits.
"Our business fundamentals are solid, but the economic environment continues to be challenging," said Hudson La Force, Grace's chief financial officer, in a conference call with analysts. He said that, among other problems, "Europe is weaker than we expected 90 days ago."
A bright spot: Sales rose almost 14 percent in Latin America and increased about 3 percent in the Asia-Pacific region, the company reported.
"I continue to be very pleased with our performance in the emerging regions," said Fred Festa, Grace's CEO, in the call with analysts.
But those gains were outweighed by larger drops elsewhere. In the firm's construction products segment, for instance, sales in western Europe dropped 27 percent as a result of unfavorable exchange rates, a "weak" construction environment and Grace's exit from "low-margin business."
Grace reported third-quarter earnings per share of 99 cents, down from $1.07 a year earlier. Analysts' expectations for the quarter averaged $1.01 per share, according to Yahoo Finance.
It remains unclear when Grace will finally emerge from bankruptcy, though the company said the fourth quarter of next year is the most realistic time frame for its exit. The U.S. Bankruptcy Court confirmed Grace's reorganization plan last year and the U.S. District Court affirmed the plan in January, but appeals are still pending.
The company's stock rose 52 cents to close at $60.20 per share in Wednesday trading on the New York Stock Exchange.
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