Exhibit 99
| | Investor Contact: | Mark E. Faford (203) 229-2654 mefaford@archchemicals.com |
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| | Press Contact: | Dale N. Walter (203) 229-3033 dnwalter@archchemicals.com |
ARCH CHEMICALS REPORTS SECOND QUARTER 2006 EARNINGS IN LINE WITH GUIDANCE; REAFFIRMS FULL YEAR EARNINGS OUTLOOK
Highlights:
| · | Second quarter earnings from continuing operations were $1.22 per share, up 18 percent, compared to $1.03 for the previous period; sales increased eight percent compared to the prior year period. |
| · | HTH water products operating income increased 74 percent over the prior year quarter. |
| · | Third quarter earnings per share from continuing operations are expected to be in the $0.20 to $0.30 range, compared to $0.28 for the prior year quarter. |
| · | The Company reaffirms full year earnings guidance to be in the $1.60 to $1.70 range. |
NORWALK, Conn., August 1, 2006 - ARCH CHEMICALS, INC. (NYSE: ARJ) announced for the second quarter 2006, sales were $446.1 million compared to $411.3 million in the corresponding period in 2005. Segment operating income for the second quarter was $49.7 million in 2006 compared to $40.0 million in 2005. Earnings from continuing operations were $1.22 per share for the second quarter 2006 on $29.6 million of income, compared to $1.03 per share on income of $24.5 million a year ago.
“The significant, year-over-year improvement in our second quarter sales and earnings results was driven by the continued success of our ambitious Water Products’ margin-improvement initiatives and another strong quarter from Performance Urethanes,” said Chairman, President and CEO Michael E. Campbell. “These strong performances, combined with record sales of biocides used in antidandruff shampoos and marine paints, more than offset the impact of persistently high raw material costs which adversely affected several of our businesses, particularly, Wood Protection. To mitigate these high costs, we continue to tightly control spending and raise prices whenever and wherever possible.”
The following compares segment sales and operating income (including equity in earnings of affiliated companies) for the second quarters of 2006 and 2005. The Company has revised the 2005 segment operating income; see Appendix for further information.
Treatment Products
Treatment Products reported sales of $375.9 million and operating income of $54.0 million compared with sales of $355.1 million and operating income of $41.8 million in 2005.
HTH Water Products
HTH water products reported sales of $197.8 million and operating income of $41.4 million in 2006 compared to sales and operating income of $183.2 million and $23.8 million respectively, in 2005.
Sales increased $14.6 million, or approximately eight percent, principally due to favorable pricing for both branded and non-branded pool treatment products in the North American market. The increase in volumes from the acquisition of the remaining 50 percent of the Company’s water products joint venture, Nordesclor ($6.1 million or three percent), was more than offset by lower volumes principally due to the shedding of unprofitable business in North America.
Operating income increased $17.6 million primarily as a result of the improved pricing for the North American product lines. In addition, operating results benefited from favorable product mix, cost reduction initiatives and the positive contribution of the acquired business. HTH water products also achieved lower freight and distribution expenses in 2006 as a result of actions taken that addressed the inefficiencies in the distribution channels, which negatively impacted 2005.
Personal Care and Industrial Biocides
Personal care and industrial biocides reported sales of $75.5 million and operating income of $11.6 million compared to sales and operating income of $70.6 million and $11.1 million, respectively, in 2005.
Sales increased $4.9 million, or approximately seven percent, due to higher volumes that are attributable to record demand for biocides used in antidandruff products and in marine antifouling paints. Higher pricing in the building products and metalworking fluids markets to mitigate increased raw material costs were mostly offset by competitive pressures in the emulsions and in-can preservation markets.
Operating income increased $0.5 million, primarily due to improved margins from the higher sales volumes, partially offset by higher raw material costs.
Wood Protection and Industrial Coatings
Wood protection and industrial coatings reported sales of $102.6 million and operating income of $1.0 million compared to sales and operating income of $101.3 million and $6.9 million, respectively, in 2005.
Sales increased $1.3 million, or approximately one percent, due to improved pricing partially offset by the unfavorable effect of foreign exchange. The improved pricing is the result of price increases to mitigate higher raw material costs for Wolman® E products used in residential applications in the wood protection business, as well as higher raw material costs principally for polyurethane and other solvent-based products in the industrial coatings business. An increase in wood protection’s volumes of Tanalith® E products used in residential applications in Europe was offset by a decrease in volumes in the Italian domestic market in the industrial coatings business.
Operating income decreased $5.9 million over the prior year primarily due to lower margins for the wood protection business and, to a lesser extent, the industrial coatings business as a result of the higher raw material costs which negatively impacted the businesses. These results were partially offset by improved equity in earnings of the Koppers joint venture that were negatively impacted in 2005 by legal expenses associated with an investigation by the New Zealand Commerce Commission ($1.5 million).
Performance Products
Performance Products reported sales of $70.2 million and operating income of $5.5 million compared with sales and operating income of $56.2 million and $3.8 million, respectively, in 2005.
Performance urethanes sales increased approximately 28 percent over the prior year due to higher volumes and improved pricing. The increase in volumes was due to stronger demand across most product lines, particularly specialty polyols, due to new business. The improved pricing was principally due to successful price increases to mitigate higher raw material costs. Operating income improved $2.0 million as a result of higher sales volumes and improved margins from higher pricing.
Hydrazine sales were comparable to the prior year period as lower volumes of Ultra PureTM Hydrazine were offset by facility fees from the new U.S. Government contract. Operating income decreased as a result of unfavorable product mix.
General Corporate Expenses
General corporate unallocated expenses increased by $4.2 million principally due to higher compensation related costs from the increase in stock price for the Company’s stock-based long-term incentive awards and stock-based deferred compensation accounts. In addition, the Company incurred increased costs associated with its U.K. pension plans and the accounts receivable securitization program.
2006 Outlook
The Company anticipates earnings from continuing operations in the third quarter 2006 to be in the $0.20 to $0.30 per share range, compared to $0.28 for the prior-year quarter.
For full year 2006, sales are now expected to increase approximately seven to nine percent over 2005 and earnings per share from continuing operations are expected to range from $1.60 to $1.70. The Company now forecasts HTH water products total year sales of approximately $475 million, compared to its previous guidance of approximately $460 million, and operating margins are expected to be in the 7.5 to 8.5 percent range, up from its earlier guidance in the seven to eight percent range. This improvement is expected to offset the adverse impact in the wood protection business from persistently high copper raw material costs. Depreciation and amortization is estimated to be approximately $45 million. Capital spending is anticipated to be in the $30 to $35 million range. Pension expense is expected to increase by approximately $7 million over prior year and the effective tax rate is assumed to be 33 percent.
Note: All references to earnings per share above reflect diluted earnings per share.
About Arch
Headquartered in Norwalk, Connecticut (USA), Arch Chemicals, Inc. is a global Biocides company with annual sales of approximately $1.3 billion. Arch and its subsidiaries provide innovative, chemistry-based solutions to control the growth of harmful microbes. The Company’s concentration is in water, hair and skin care products, pressure-treated wood, paints and coatings, building products and health and hygiene applications. Arch Chemicals operates in two segments: Treatment Products and Performance Products. Together with its subsidiaries, Arch has approximately 3,000 employees and manufacturing and customer-support facilities in North and South America, Europe, Asia and Africa. For more information, visit the Company’s Web site at http://www.archchemicals.com.
| · | Listen in live to Arch Chemicals’ second quarter 2006 earnings conference call on Tuesday August 1, 2006 at 11:00 a.m. (ET) at http://www.archchemicals.com. |
| · | If members of the public wish to access Arch’s live earnings call in a listen-only mode, dial: (800) 289-0493, passcode 6745570, in the United States or (913) 981-5510, passcode 6745570, outside the United States. |
| · | A telephone replay will be available from 3:00 p.m. on Tuesday, August 1, 2006 until 6:00 p.m. (ET) on Tuesday August 8, 2006. The replay number is (888) 203-1112, passcode 6745570; from outside the United States, please call (719) 457-0820, passcode 6745570. |
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Except for historical information contained herein, the information set forth in this communication contains forward-looking statements that are based on management's beliefs, certain assumptions made by management and management's current expectations, outlook, estimates and projections about the markets and economy in which the Company and its various businesses operate. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "opines," "plans," "predicts," "projects," "should," "targets" and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Future Factors"), which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expected or forecasted in such forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise. Future Factors which could cause actual results to differ materially from those discussed include but are not limited to: general economic and business and market conditions; recession or lack of moderate growth in U.S. and European economies; increases in interest rates; economic conditions in Asia; worsening economic and political conditions in Venezuela; changes in foreign currencies against the U.S. dollar; customer acceptance of new products; efficacy of new technology; changes in U.S. laws and regulations; increased competitive and/or customer pressure; the Company's ability to maintain chemical price increases; higher-than-expected raw material costs and availability for certain chemical product lines; an increase in anti-dumping duties on certain products; increased foreign competition in the calcium hypochlorite markets; unfavorable court, arbitration or jury decisions or unfavorable tax matters; the supply/demand balance for the Company's products, including the impact of excess industry capacity; failure to achieve targeted cost-reduction programs; capital expenditures in excess of those scheduled; environmental costs in excess of those projected; the occurrence of unexpected manufacturing interruptions/outages at customer or company plants; reduction in expected government contract orders; a decision by the Company not to start up the hydrates manufacturing facility; unfavorable weather conditions for swimming pool use; inability to expand sales in the professional pool dealer market; and gains or losses on derivative instruments.
