HOUSTON, May 30, 2001 (PRIMEZONE) -- KMG Chemicals, Inc. (Nasdaq:KMGB), a global provider of specialty chemicals in carefully-focused markets, today announced its unaudited financial results for the fiscal third quarter ended April 30, 2001.
KMG's net sales for the fiscal third quarter 2001 were $8.1 million, off from $8.2 million in the third quarter 2000. Fiscal third quarter net income was $211,000 or $.03 per diluted share, compared to $948,000 or $.12 per diluted share in the same 2000 quarter. A continuing softness in demand for wood treatment chemicals is adversely impacting fiscal 2001 operating results, and management anticipates that earnings per share for fiscal 2001 will be about 20% lower than last year.
Sales of wood treatment chemicals fell significantly in the fiscal third quarter 2001, but that decrease was largely offset by sales of MSMA agricultural chemicals (Bueno(r)6), a product line acquired in October 2000. However, the company's gross profit margin decreased in the third quarter, to 30.9% from 40.2% in the same prior year quarter. This was the result of a substantial decrease in sales of higher gross margin wood treatment chemicals during the quarter.
SG&A increased almost $400,000 from the year-ago quarter due to the addition of the MSMA product line, and to a cost reduction program that included severance payments on staff reductions. The full effect of these cost savings, estimated to be from $300,000 to $500,000 annually, will be evident in fiscal 2002.
David Hatcher, chief executive officer and president of KMG Chemicals, said, "Although we firmly believe it is a short term situation, railroad crosstie insertions are down significantly from earlier this year due to aggressive maintenance deferrals on the part of the railroads. Also, the electric utilities are currently deferring maintenance, creating much softer demand for treated replacement utility poles. These deferrals could take more than a quarter or two to turn around, but the situation will reverse as an unavoidable pent-up need for these products develops. The demand curve for these treated wood products has proven to be flat over the long term.
"Although our recently-acquired Bueno(r)6 agricultural herbicide contributed positively to both sales and earnings in the fiscal third quarter," continued Hatcher, "there was not as much impact in the quarter as we had anticipated. Weather conditions delayed cotton plantings in the southeastern United States, resulting in chemical purchase delays."
Hatcher concluded, "The relocation of the MSMA products plant to the Matamoros facility is on schedule and within budget. We currently believe we are on track to meet MSMA sales and earnings goals for fiscal 2001, and next year should see even better profit performance from MSMA as startup expenses decrease. We also are continuing to actively pursue acquisition opportunities in lines of specialty chemicals that offer significant earnings potential."
KMG Chemicals, Inc.
Selected Financial Data
(UNAUDITED, and in thousands, except share data)
Three Months Ended Nine Months Ended
April 30 April 30
-------- --------
2001 2000 2001 2000
--------- --------- --------- ---------
Net sales $ 8,098 $ 8,176 $ 24,593 $ 24,771
Gross profit 2,502 3,287 8,587 9,744
Gross profit margin 30.9% 40.2% 34.9% 39.3%
Income before
income tax 341 1,549 2,854 4,397
Net income 211 948 1,769 2,746
EBITDA 639 1,820 3,709 5,207
Earnings per
diluted share 0.03 0.12 0.23 0.35
Weighted average
diluted shares
outstanding 7,543,089 7,733,400 7,593,961 7,734,118
Working capital 7,501 9,657 7,501 9,657
Long-term debt $ 2,671 $ 2,554 $ 2,671 $ 2,554
KMG Chemicals, through its subsidiaries, is a global provider of wood preservation chemicals to the lumber and timber treatment markets, and herbicides to the agricultural markets. Its wholly owned subsidiary, KMG-Bernuth, Inc., is a manufacturer and distributor of specialty chemicals to carefully focused markets. KMG-Bernuth's primary production facility is in Matamoros, Mexico and is operated by another subsidiary company, KMG de Mexico. Products are distributed from facilities in the United States and Mexico. For more information about the Houston-based holding company, visit the company's Web site at www.kmgchemicals.com.
The information in this news release includes certain forward-looking statements that are based upon assumptions that in the future may prove not to have been accurate and are subject to significant risks and uncertainties, including statements as to the future performance of the company. Although the company believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct. Factors that could cause results to differ include, but are not limited to, successful performance of internal plans, product development acceptance, the impact of competitive services and pricing and general economic risks and uncertainties.