Plastics compounder A Schulman sees increased buying from Europe
US-based plastics compounder A. Schulman said Friday that it expects to report earnings of about $58 million for its fiscal year ended August 31, up from prior projections of between $50 million and $52 million of adjusted net income for the year.
The improvement in adjusted net income compared with ptiot guidance was driven primarily by unexpected strength in volume, improved margins, and favorable tax adjustments that positively impacted fiscal 2011 fourth-quarter and full-year results:
- An unanticipated volume improvement in the European distribution business occurred late in the fourth quarter, which Schulman believes was the result of increased buying patterns by customers in anticipation of rising raw material prices.
- Schulman also experienced unanticipated general margin expansion across all of its businesses.
- In addition, the company recorded customary annual tax adjustments which contributed more favorably to net income than usual.
Joseph M. Gingo, CEO, said: “Operationally, we are pleased that we now anticipate stronger results that will exceed our expectations for the fiscal 2011 fourth quarter and full year. However, the lack of stability in global markets is making forward-looking projections into 2012 very difficult.
“While this latest boost in margin will contribute to better results for the year, we are not convinced that this favorable trend is sustainable, given the current unpredictability of the global markets,” he added.
In August, Schulman announced that it was adjusting its guidance because of the expected impact of certain special charges, as well as anticipated weakening demand trends.
The tax impact combined with the volume increases in Europe and the overall margin improvement in the fourth quarter are now expected to largely offset the negative operational impact from the special charges related to a legal settlement involving a business relationship, as well as a non-cash charge related to inventory reserve harmonization.
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