KMG Chemicals, Inc. (NASDAQ: KMGB), a global provider of specialty
chemicals in carefully focused markets, today announced preliminary
earnings expectations for the fourth quarter and year ended July 31,
2011, and the scheduling of its fourth quarter and year end news release
and conference call.
Neal Butler, President and CEO of KMG, stated, "We achieved record
revenues in the fiscal 2011 fourth quarter, representing an approximate
14% increase over the fiscal 2011 third quarter. However, we anticipate
fourth quarter net income will be about half the net income of $2.6
million, or $0.23 per diluted share, reported in the third quarter of
fiscal 2011. Despite the decline in income, we are optimistic as we
enter fiscal 2012.
"Fourth quarter operating profits in our Electronic Chemicals segment
were well below expectations, with most of the shortfall due to raw
material cost increases and certain extraordinary integration costs
associated with the completion of the consolidation of our manufacturing
sites. With this consolidation completed, our operations team has been
successful in reducing plant related costs, with the full benefit of
these reductions to be realized in fiscal 2012."
Mr. Butler continued, "Pricing actions were implemented in the third and
fourth quarters to capture the raw material cost increases incurred
earlier in the year; however, these costs continued to escalate
unexpectedly through the fourth quarter, pushing our pricing strategy
about one quarter behind schedule. Historically, we have been able to
fully recover cost increases within a reasonable period; however, as
previously reported, we postponed necessary price increases to ensure a
smooth and complete requalification process by our customers of the
products impacted by our plant consolidation initiative. This strategy
was successful, as we maintained virtually all of the pre-integration
sales volumes of these products. Our pricing strategy is in place to
capture all of those cost increases and we expect to return to
normalized margins early in fiscal 2012.
"Wood treating also contributed to the shortfall, but to a much lesser
extent. Creosote sales in the fourth quarter rebounded as anticipated;
however, cost increases from creosote suppliers continued, pressuring
margins. Pricing actions have been implemented that we expect will
capture those cost increases in the first quarter of fiscal 2012."