Kraton Performance Polymers (KRA) Tops Q1 EPS by 25c, Sales Miss

Kraton Performance Polymers (NYSE: KRA) reported Q1 EPS of $0.80, $0.25 better than the analyst estimate of $0.55. Revenue for the quarter came in at $419.9 million versus the consensus estimate of $463.13 million.

"Kraton's first quarter 2016 results reflect solid business performance and continued execution against our stated strategic objectives. Our first quarter 2016 Adjusted EBITDA of $93 million includes $52 million of Adjusted EBITDA from our Polymer segment and $41 million from our newly-acquired Chemical segment," said Kevin M. Fogarty, Kraton's President and Chief Executive Officer. "Building upon the good business momentum we saw in the fourth quarter of 2015, our Polymer segment posted record first quarter Adjusted EBITDA, exceeding the previous record realized in the first quarter 2015. Our Polymer segment posted its second sequential quarter with adjusted gross profit in excess of $1,000 per ton, and although first quarter 2016 results did not benefit from the unit margin expansion that falling raw material prices provided in the first quarter 2015, our first quarter 2016 results do reflect a benefit from lower SG&A costs and an incremental $3.7 million of cost reductions under our $70 million cost reduction initiative. By year end we expect to realize $25-$28 million of the anticipated $70 million cost reduction program in the Polymer segment."

"Results for the Chemical segment reflect stable business performance and profitability, as evidenced by the first quarter 2016 Adjusted EBITDA margin of 23.1 percent. Nevertheless, we see opportunity to improve overall profitability through targeted actions to recover prior period lost sales, specifically in our Chemical Intermediates business, disciplined use of analytical tools to ensure our refinery balances are truly profit-optimal, and by leveraging improved fundamentals of substitute product pricing in both our Adhesive and Chemical Intermediates businesses. In fact, an improved trend was evident as the first quarter evolved," Fogarty added. "Regarding the process of integrating Arizona Chemical, we expect to realize $21-$27 million of the targeted $65 million in transaction synergies in 2016, and we captured $2.9 million of these synergies in the first quarter."

"Lastly, we remain focused on reducing the leverage we incurred to complete the acquisition of Arizona Chemical. During the quarter, we sold certain assets associated with our compounding business for $72 million, and we used the proceeds from the sale to reduce outstanding indebtedness," said Fogarty.

For earnings history and earnings-related data on Kraton Performance Polymers (KRA) click here.

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