(Source: PRNewswire-FirstCall)
DALLAS, Aug. 6 /PRNewswire-FirstCall/ -- Valhi, Inc. reported a net loss attributable to Valhi stockholders of $19.0 million, or $.16 per diluted share, in the second quarter of 2009 as compared to a net loss of $.2 million, or nil per diluted share, in the second quarter of 2008. For the first six months of 2009, Valhi reported a net loss attributable to Valhi stockholders of $39.0 million, or $.34 per diluted share, compared to net loss of $6.1 million, or $.05 per diluted share, in the first six months of 2008.
The Chemicals Segment's sales decreased $109.7 million in the second quarter of 2009 as compared to the second quarter of 2008 and decreased $194.3 million in the first six months of 2009 compared to the first six months of 2008. Net sales decreased in both the second quarter and the first six months of 2009 primarily due to a decrease in sales volumes, which were 19% lower in the quarter and 22% lower in the year-to-date period. Additionally, the unfavorable effect of fluctuations in foreign currency exchange rates decreased the Chemicals Segment's sales by approximately $26 million for the quarter and $38 million in the year-to-date period. The Chemicals Segment's average selling prices were 1% higher in the second quarter of 2009, and 3% higher for the year-to-date period, as compared to the respective 2008 periods. The table at the end of this release shows how each of these items impacted the overall decrease in sales.
In late 2008, as a result of the decrease in global demand, the Chemicals Segment experienced a build up in inventory levels. In order to decrease inventory levels and improve liquidity the Chemicals Segment implemented production curtailments. Through these curtailments the Chemicals Segment has successfully reduced inventory levels and increased liquidity, although the resulting curtailments led to a net loss due to the large amount of unabsorbed fixed production costs charged to expense as incurred. Finished goods inventories at June 30, 2009, which represented less than 2 months of average sales, were lower compared to both March 31, 2009 and December 31, 2008.
The Chemicals Segment's reported an operating loss of $20.0 million in the second quarter of 2009 compared to operating income of $10.8 million in the second quarter 2008 and an operating loss of $45.5 million in the first six months of 2009 compared to operating income of $21.8 million in the first six months of 2008. Operating income declined in both periods due to the negative effects of production curtailments, which resulted in significantly higher manufacturing costs per ton of pigment production. This was somewhat offset by the positive effects of higher TiO2 selling prices and the favorable effects of fluctuations in foreign currency exchange rates, which the Chemicals Segment estimates decreased the operating loss by approximately $20 million and $48 million in the second quarter and the year-to-date period, respectively. The Chemicals Segment's TiO2 production volumes were 34% and 43% lower in the second quarter and first six months of 2009, respectively, as compared to the same periods in 2008.
The Component Products Segment's sales decreased $14.5 million in the second quarter of 2009 as compared to the same quarter of 2008, and declined $26.5 million in the year-to-date period, primarily due to lower order rates from its customers resulting from unfavorable economic conditions in North America. The Component Products Segment's operating loss was $.9 million in the second quarter of 2009 compared to operating income of $4.5 million in the same period of 2008, and the operating loss was $1.9 million in the first six months of 2009 compared to operating income of $7.5 million in the first six months of 2008. These declines in operating income were primarily due to reduced coverage of overhead and fixed manufacturing costs from lower sales volume and the related under-utilized capacity, which was partially offset by cost reductions implemented in response to lower sales. The second quarter 2009 operating loss also includes a $1.6 million related to a write-down of assets held for sale and patent litigation expenses.
The Waste Management Segments' sales were flat, and its operating loss increased, due to low utilization of waste management services in 2009. The Waste Management Segment is continuing to seek opportunities to obtain certain types of new business that, if obtained, would increase its waste management sales and decrease its waste management operating loss. In this regard, in January 2009, the Texas Commission on Environmental Quality ("TCEQ") issued to the Waste Management Segment a final license for the near-surface disposal of Class A, B and C low-level radioactive waste ("LLRW") at its site in Andrews County, Texas. The LLRW disposal operations will be very similar to those activities it is currently permitted to perform under a byproduct disposal license issued by TCEQ in May 2008. Both types of waste are primarily soil-like and the disposal methods and disposal sites are similar. The Waste Management Segment has entered into a contract to design, construct and engineer the LLRW and byproduct material disposal sites. The byproduct site is expected to begin disposal operations in September 2009.
