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Buckeyes nonwovens sales drop due to weak Euro

25 Apr '12

4 min read

Buckeye Technologies Inc announced third quarter adjusted net income of $27.0 million or $0.67 per share, which excludes after-tax restructuring and asset impairment charges of $0.8 million, or $0.02 per share, related to the closure of the cotton linter pulp production line in Americana, Brazil and sale of its converting business in King, North Carolina, and after-tax interest expense of $0.4 million or $0.01 per share related to cellulosic biofuel credits.

Adjusted net income was down 7% as compared to the prior year period's $29.0 million, or $0.71 per share, which excluded after tax costs of $0.3 million, or $0.01 per share, primarily related to accrued interest associated with cellulosic biofuel credits.

Net sales of $217 million were down $21 million or 9% versus last year's third quarter sales of $238 million. About $11 million of the reduction in sales was related to the closure or divestiture of under-performing and non-core assets. Nonwovens sales were down $7 million or 11% year over year excluding the impact of the January 31st divestiture of the Merfin Systems converting business.

The primary driver was lower shipment volume in North America. The $0.04 reduction in adjusted EPS compared to the prior year period was the result of the power outage at the Foley specialty wood fibers mill, which the Company announced in late February. The impact of the King divestiture and Americana plant closure on adjusted EPS compared to the year ago quarter was insignificant. An overall net increase in selling prices combined with lower direct manufacturing costs mostly offset the effect of reduced shipment volume and a less favorable mix.

Comparing the third quarter to the second quarter of fiscal 2012, sales were down $10 million or 4%. About $9 million of this reduction in sales was related to business divestitures and plant closures. Nonwovens sales were down about $1 million due to a weaker Euro and reduced pricing. While sales volume in Europe was up compared to a seasonally weak second quarter, nonwovens sales volume in North America was down by an offsetting amount.

Adjusted operating income was down $1.0 million due to the negative impact of the February power outage at the Foley mill ($2.4 million net of expected insurance proceeds). The January 1st price increase on our specialty wood pulp grades more than offset lower fluff pulp pricing and a less favorable specialty fibers shipment mix. Costs were relatively stable between the second and third quarters of fiscal 2012.

The impact of divestitures and plant closures on operating income between these two quarters was positive $0.3 million. Adjusted EPS of $0.67 was down $0.02 compared to $0.69 in the second quarter due to the $0.04 impact of the February power outage at the Foley mill.

Chairman and Chief Executive Officer John B. Crowe said, "This was a very busy and productive quarter for Buckeye. We completed the energy project and the ground-breaking for the Specialty Expansion Project at our Florida mill; we closed our cotton linter pulp facility in Brazil, and we sold our converting business in King, N.C. All of these activities will improve Buckeye's margins and return on invested capital. It was also a challenging quarter due to the power failure in mid-February and subsequent downtime at our Florida facility. This caused our financial performance to come in below the expectations that we shared at our earnings call in January.

"We continue to focus on generating both cash flow and returns on investment above our cost of capital, while taking a balanced approach to the allocation of capital. During the quarter, we used our strong cash flow from operations plus an additional $6 million from the sale of our King converting business to fund $22 million in capital expenditures (up $8 million from the previous quarter), pay down debt by $17 million, and pay a quarterly dividend of $3 million.”

“The Board of Directors voted to raise our quarterly dividend to 8 cents per share, and earlier this month, we repurchased another 100,000 shares of our stock for $3.3 million. With our recent moves to address under-performing and non-core assets, we are redirecting the cash and management focus into improving our Nonwovens performance and accelerating growth opportunities like the Foley Specialty Expansion Project. We expect our fiscal year 2012 willill be another year of record results helped by our various initiatives."

Buckeye Technologies Inc