Compañía de Minas Buenaventura S.A.A. press release
NOVA Chemicals: Business Conditions Strengthen
NYSE - New York Stock Exchange · Peru
PITTSBURGH, July 20 /CNW/ - All financial information is in U.S. dollars unless otherwise indicated.
NOVA Chemicals Corporation (NOVA Chemicals) (NYSE:NCX)(TSX:NCX) reported net income of $108 million ($1.30 per share diluted) for the second quarter of 2006. The second quarter's net income compares to a net loss of $5 million ($0.06 per share) for the first quarter of 2006 and a net loss of $25 million ($0.29 per share) for the second quarter of 2005. During the second quarter, NOVA Chemicals restructured into three business units. Net income from the businesses is shown below: <<
Core Business: $147 million or $1.77 per share 1. Olefins/Polyolefins 2. Expandable Polystyrene/Styrenic Performance Products
3. STYRENIX: $(45) million or $(0.54) per share The following unusual items had a net positive impact of $52 million or $0.62 per share on second quarter earnings:
-- Canadian tax rate reductions $60 million or $0.72 per share -- June Corunna outage $(8) million or $(0.10) per share >>
"Business conditions and our results improved through the second quarter. With meaningful benefits from our restructuring, we will deliver total annual cost reductions of approximately $65 million by the end of the third quarter that will positively impact company results," said Jeff Lipton, NOVA Chemicals' President and CEO. "Our restructuring will refocus NOVA Chemicals on our core business, whose strength will be clear, while positioning STYRENIX as a potential catalyst for change in the industry."
Second Quarter Snapshot
Olefins/Polyolefins:
-- Net income of $151 million compared to $70 million in the previous quarter
-- Alberta Advantage of 14 cents per pound of ethylene cash cost, up from 5 cents per pound in the first quarter
-- Polyethylene Performance Products sales volumes increased by 20% versus the previous quarter
-- Canadian corporate tax rate reduction from 34% to 33% in 2006 and 30% by 2010
Expandable Polystyrene/Styrenic Performance Products (EPS/SPP):
-- Net loss of $4 million compared to a net loss of $6 million in the previous quarter
-- ARCEL(R) resin capacity expansions completed as scheduled by the end of the quarter
STYRENIX:
-- Net loss of $45 million compared to a net loss of $39 million in the previous quarter
-- Restructuring will enable cost reductions of $45 million per year
NOVA Chemicals will host a conference call today, Thursday, July 20, 2006, for investors and analysts at 10 a.m. EDT (8 a.m. MDT; 7 a.m. PDT). Media are welcome to join this call in "listen-only" mode. The dial-in number for this call is (416) 406-6419. The replay number is (416) 695-5800 (Reservation No. 3190159). The live call is also available on the Internet at www.investorcalendar.com (ticker symbol NCX).
<< NOVA Chemicals Highlights (millions of U.S. dollars except per share amounts and as noted)
Three Months Ended Six Months Ended June 30 Mar. 31 June 30 June 30 June 30 2006 2006 2005 2006 2005 Net income (loss) Core Olefins/Polyolefins $151 $70 $56 $221 $169 EPS/SPP (4) (6) (6) (10) (6) STYRENIX (45) (39) (71) (84) (91) Corporate and other(1) 6 (30) (4) (24) (3) Net income (loss) $108 $(5) $(25) $103 $69
Earnings (loss) per common share basic $1.31 $(0.06) $(0.29) $1.25 $0.84 diluted $1.30 $(0.06) $(0.29) $1.24 $0.82
Weighted-average common shares outstanding (millions)(2)(3) basic 83 82 82 83 83 diluted 83 82 82 83 90
Revenue $1,619 $1,553 $1,329 $3,172 $2,817 Adjusted EBITDA(4) $189 $121 $75 $310 $317
Depreciation and amortization $77 $72 $74 $149 $146 Funds from operations $101 $59 $45 $160 $197 Capital expenditures $64 $41 $115 $105 $188 Average capital employed(5) $3,769 $3,579 $3,354 $3,674 $3,373 After-tax return (loss) on capital employed(6) 14.6% 2.9% (0.5)% 8.9% 6.4% Return (loss) on average common equity(7) 31.8% (1.6)% (7.2)% 15.8% 9.9%
(1) See tables on page 11 for a description of all Corporate Items. (2) Weighted-average number of common shares outstanding during the period used to calculate the earnings (loss) per share (see Note 7, page 22). (3) For periods where there are losses, diluted shares are the same as basic shares because outstanding securities such as stock options that could potentially dilute earnings per share would be anti-dilutive and are therefore excluded from outstanding diluted shares. (4) Net income (loss) before restructuring charges, income taxes, other gains and losses, interest expense and depreciation and amortization (see Consolidated Statement of Net Income (Loss) and Reinvested Earnings on page 17 and Supplemental Measures on page 11). (5) Average capital employed equals cash expended on plant, property and equipment (less accumulated depreciation and amortization) and working capital, and excludes assets under construction and investments. Amounts are converted to U.S. dollars using quarter-end exchange rates (see Supplemental Measures on page 11). (6) After-tax return (loss) on capital employed equals NOVA Chemicals' net income (loss) plus after-tax interest expense (annualized) divided by average capital employed (see Supplemental Measures on page 11). (7) Return (loss) on average common equity equals annualized net income (loss) divided by average common equity.
OLEFINS/POLYOLEFINS BUSINESS UNIT Financial Highlights (millions of U.S. dollars except as noted) Three Months Ended Six Months Ended June 30 Mar. 31 June 30 June 30 June 30 2006 2006 2005 2006 2005 Revenue(1) $1,078 $1,008 $851 $2,086 $1,809 Operating income $160 $129 $101 $289 $288 Depreciation and amortization 46 43 42 89 83 Adjusted EBITDA(2) $206 $172 $143 $378 $371 Net income $151 $70 $56 $221 $169 Capital expenditures $28 $19 $62 $47 $108 Average capital employed(3) $2,482 $2,314 $2,000 $2,398 $2,024 After-tax return on capital employed(4) 27.0% 15.1% 13.1% 21.3% 18.7%
(1) Before intersegment eliminations. (2) Net income before restructuring charges, income taxes, other gains and losses, interest expense and depreciation and amortization (see Supplemental Measures on page 11). (3) Average capital employed equals cash expended on plant, property and equipment (less accumulated depreciation and amortization) and working capital and excludes assets under construction. Amounts are converted to U.S. dollars using quarter-end exchange rates. (4) After-tax return on capital employed equals net income plus after-tax interest expense (annualized) divided by average capital employed.
Operating Highlights
Average Benchmark Prices(1) (U.S. dollars per pound, unless otherwise noted) Three Month Average Six Month Average June 30 Mar. 31 June 30 June 30 June 30 2006 2006 2005 2006 2005 Benchmark Principal Products: Ethylene(2) $0.47 $0.50 $0.38 $0.48 $0.40 Polyethylene - LLDPE butene liner(3) $0.63 $0.69 $0.51 $0.66 $0.55 Polyethylene - weighted- average benchmark(4) $0.66 $0.70 $0.55 $0.68 $0.59
Benchmark Raw Materials: NYMEX natural gas (dollars per mmBTU)(5) $6.82 $9.07 $6.80 $7.95 $6.56 WTI crude oil (dollars per barrel) (6) $70.69 $63.48 $53.17 $67.09 $51.51
(1) Average benchmark prices do not necessarily reflect actual prices realized by NOVA Chemicals or any other petrochemical company. (2) Source: Chemical Market Associates, Inc. (CMAI) U.S. Gulf Coast (USGC) Net Transaction Price. (3) Linear Low-Density Polyethylene (LLDPE) butene liner. Source: Townsend Polymer Services Information (TPSI). (4) Benchmark prices weighted according to NOVA Chemicals' sales volume mix in North America. Source for benchmark prices: TPSI. (5) Source: New York Mercantile Exchange (NYMEX) Henry Hub 3-Day Average Close, values in millions of British Thermal Units (mmBTU). (6) Source: NYMEX WTI daily spot-settled price average for calendar month.
Polyethylene Sales Volumes (millions of pounds) Three Months Ended Six Months Ended June 30 Mar. 31 June 30 June 30 June 30 2006 2006 2005 2006 2005
Standard Products 691 615 620 1,306 1,279 Performance Products(1) 146 122 105 268 201 Total 837 737 725 1,574 1,480
(1) Performance Products include SCLAIR(R) and SURPASS(R) resins produced at the Joffre site using Advanced SCLAIRTECH(TM) technology. >>
NOVA Chemicals' ability to implement announced price increases depends on many factors that may be beyond its control. See Forward-Looking Information on page 16.
Review of Operations Olefins/Polyolefins
The Olefins/Polyolefins business unit reported net income of $151 million in the second quarter of 2006 compared to net income of $70 million in the first quarter. Of the $81 million improvement, $60 million was the result of reduced tax rates in Canada (see page 5). The remaining improvement was primarily due to margin increases and expanded Corunna operations. Margins improved as lower prices were more than offset by lower feedstock costs. Volume was up mainly due to the first quarter impact of the extended Corunna outage.
Ethylene and Feedstocks
USGC ethylene benchmark prices averaged 47 cents per pound in the second quarter of 2006 compared to 50 cents per pound in the first quarter. The average price of NYMEX contract natural gas was down 25% to $6.82 per mmBTU. USGC ethane prices averaged 157% of NYMEX natural gas cash prices, up from an average of 112% in the previous quarter. AECO cash natural gas prices were down 18% from the first quarter to $5.35 per mmBTU in the second quarter. The Alberta Advantage averaged 14 cents per pound of cash cost of ethylene production in the second quarter of 2006, up significantly from 5 cents per pound in the first quarter. The advantage strengthened as NOVA Chemicals' ethane costs decreased by 16%, while ethane prices on the USGC increased 19%. USGC ethane prices rose due to strong demand for ethane feedstock, resulting from high USGC ethylene operating rates as well as the rapid increase in the costs of alternative feeds. In July, the Alberta Advantage was widened further to approximately 20 cents per pound. Alberta advantaged ethylene is used to produce approximately 65% of NOVA Chemicals' total polyethylene. The average price of WTI crude oil was up 11% to $70.69 per barrel in the second quarter. This increase in crude oil feedstock cost was more than offset by higher co-product revenues from the Corunna flexi-cracker. In the second quarter, the Corunna flexi-cracker was fully operational until June 19, when production at the facility was stopped due to the inadvertent activation of a process shutdown switch by a third-party contractor. The resulting financial impact in the second quarter was $8 million after-tax. The facility returned to normal operations within two weeks of the stoppage. The financial impact in the third quarter will be approximately $1 million after-tax.
Polyethylene
NOVA Chemicals' total polyethylene sales volume for the second quarter was 837 million pounds, up 100 million pounds from the previous quarter, mainly reflecting increased ethylene availability from Corunna. International sales volumes decreased 7% quarter-over-quarter to 95 million pounds primarily due to a focus on improved domestic sales and margin opportunities. International sales represented 11% of total polyethylene sales in the second quarter. North American polyethylene demand exceeded supply in the second quarter even though producer operating rates averaged 92%. During the same period, the American Plastics Council (APC) reported that North American producer inventories were reduced to 36 days of sales by the end of the quarter, which is at the low end of the historical range. NOVA Chemicals finished the second quarter with 22 days of polyethylene inventory, up from 18 days at the end of the first quarter. A 6 cents per pound polyethylene price increase was implemented in North America in May and June, reversing the industry trend of five straight months of 4 cents per pound price decreases through April. Two polyethylene price increases totaling 12 cents per pound were announced during the second quarter and are expected to be implemented in the third quarter.
Performance Products
Second quarter sales of polyethylene Performance Products manufactured using Advanced SCLAIRTECH technology were 146 million pounds, or 69% of the plant's 213 million pound quarterly capacity, up from 57% in the previous quarter. Second quarter sales volume increased 20% from the first quarter of 2006 and 39% versus the second quarter of 2005. The commercialization of new products for molding applications continues to drive the growth of Performance Product sales.
Canadian Tax Rate Reductions
During the second quarter of 2006, the Canadian federal and Alberta provincial governments passed legislation that will reduce income tax rates in their jurisdictions. For income subject to tax in Alberta, the rate was reduced from 11.5% to 10% effective April 1, 2006. For income subject to Canadian federal tax, the rate will gradually reduce from 22.1% in 2007 to 19.0% in 2010. As a result of these changes, NOVA Chemicals reduced its future tax liability by $60 million and recorded the tax savings as income in the second quarter of 2006. Virtually all of the income subject to these taxes is earned by the Olefins/Polyolefins business unit.
Second Quarter 2006 Versus Second Quarter 2005
Net income of $151 million in the second quarter of 2006 was up from net income of $56 million in the second quarter of 2005. The quarter-over-quarter improvement was due to product prices rising faster than feedstock costs, increased production from Corunna and the benefit received in the second quarter of 2006 as a result of the Canadian tax rate reductions.
First Six Months 2006 Versus First Six Months 2005
Net income for the first six months of 2006 was $221 million, up from $169 million for the first six months of 2005. The improvement in the year-over-year results was primarily related to increases in unit margin, the improved market conditions and the Canadian tax rate reductions. <<
EXPANDABLE POLYSTYRENE / STYRENIC PERFORMANCE PRODUCTS BUSINESS UNIT
Financial Highlights (millions of U.S. dollars except as noted)
Three Months Ended Six Months Ended June 30 Mar. 31 June 30 June 30 June 30 2006 2006 2005 2006 2005 Revenue(1) $106 $99 $102 $205 $204 Operating loss $(4) $(6) $(8) $(10) $(8) Depreciation and amortization 3 3 3 6 6 Adjusted EBITDA(2) $(1) $(3) $(5) $(4) $(2) Net loss $(4) $(6) $(6) $(10) $(6) Capital expenditures $31 $20 $14 $51 $24 Average capital employed(3) $221 $216 $238 $218 $236 After-tax loss on capital employed(4) (4.6)% (7.7)% (7.1)% (6.1)% (2.9)%
(1) Before intersegment eliminations. (2) Net loss before restructuring charges, income taxes, other gains and losses, interest expense and depreciation and amortization (see Supplemental Measures on page 11). (3) Average capital employed equals cash expended on plant, property and equipment (less accumulated depreciation and amortization) and working capital and excludes assets under construction. Amounts are converted to U.S. dollars using quarter-end exchange rates. (4) After-tax loss on capital employed equals net loss plus after-tax interest expense (annualized) divided by average capital employed. >>
NOVA Chemicals' ability to implement announced price increases depends on many factors that may be beyond its control. See Forward-Looking Information on page 16.
Review of Operations
EXPANDABLE POLYSTYRENE/ STYRENIC PERFORMANCE PRODUCTS
On June 26, 2006, NOVA Chemicals announced plans to restructure its traditional Styrenics business into two new business units, EPS/SPP and STYRENIX, with each unit to report results separately. EPS/SPP, which includes NOVA Chemicals' North American expandable polystyrene and Styrenic Performance Products operations, remains part of NOVA Chemicals' core business. The EPS/SPP business unit includes the following:
-- Beaver Valley site, PA; Painesville, OH; and Belpre, OH polymer facilities
-- ARCEL, DYLARK(R) FG, DYLARK automotive, NAS(R), ZYLAR(R), and ZYLAR EX resins
-- Equity position in Lyondell's Channelview, TX styrene monomer facility
-- NOVA Chemicals' interest in the NOVIDESA 50:50 joint venture in Mexico
-- New business ventures
-- NOVA Chile
The EPS/SPP business unit reported a net loss of $4 million in the second quarter of 2006 compared to a net loss of $6 million in the first quarter. The quarter-over-quarter improvement in earnings was primarily related to volume growth in EPS construction and cup markets.
North American Expandable Polystyrene (EPS)
North American EPS sales volume increased by 23% quarter-over-quarter and by 13% on a year-to-date basis. APC reported a total EPS sales increase of 17% quarter-over-quarter and an increase of 5% year-over-year. The quarter-over-quarter volume increase largely reflects seasonal EPS growth in the North American construction and cup market segments. The increase in the sales volume offset the decrease in EPS prices. A 4 cents per pound price increase, effective July 1, was announced during the second quarter and is expected to be implemented during the third quarter.
Performance Products
Styrenic Performance Products sales volumes were flat quarter-over-quarter. The ARCEL base resin capacity expansion at the Beaver Valley site was completed during the second quarter and the plant re-started in late May 2006, as scheduled. The construction of new finishing capacity for ARCEL base resins in Ningbo, China, a venture with Loyal Chemical, was completed at the end of June 2006. These expansions are both components of the plan to expand manufacturing capacity for ARCEL resin to 220 million pounds per year by the end of 2008. Continued sales growth of Performance Products is expected with the introduction of new applications such as the Reynolds' new microwave-safe rotisserie packaging made with DYLARK FG resins and the specification of ARCEL moldable foam resin by Panasonic for protective packaging of high-definition plasma televisions.
Second Quarter 2006 Versus Second Quarter 2005
The EPS/SPP business unit had a net loss of $4 million in the second quarter of 2006, compared to a net loss of $6 million in the second quarter of 2005 due to a 10% increase in sales volume.
First Six Months 2006 Versus First Six Months 2005
The net loss for the first six months of 2006 was $10 million, compared to a net loss of $6 million for the first six months of 2005. Although competitive factors have driven prices down during the first six months of 2006, volume increased due to the growth of EPS in North American construction and cup market segments and the addition of new customer accounts. <<
STYRENIX BUSINESS UNIT
Financial Highlights (millions of U.S. dollars except as noted)
Three Months Ended Six Months Ended June 30 Mar. 31 June 30 June 30 June 30 2006 2006 2005 2006 2005 Revenue(1) $510 $512 $449 $1,022 $968 Operating loss $(53) $(45) $(90) $(98) $(109) Depreciation and amortization 28 26 29 54 57 Adjusted EBITDA(2) $(25) $(19) $(61) $(44) $(52) Net loss $(45) $(39) $(71) $(84) $(91) Capital expenditures $5 $2 $39 $7 $56 Average capital employed(3) $1,168 $1,134 $1,182 $1,151 $1,195 After-tax loss on capital employed(4) (11.5)% (9.4)% (21.0)% (10.5)% (12.4)%
(1) Before intersegment eliminations. (2) Net loss before restructuring charges, income taxes, other gains and losses, interest expense and depreciation and amortization (see Supplemental Measures on page 11). (3) Average capital employed equals cash expended on plant, property and equipment (less accumulated depreciation and amortization) and working capital and excludes assets under construction. Amounts are converted to U.S. dollars using quarter-end exchange rates. (4) After-tax loss on capital employed equals net loss plus after-tax interest expense (annualized) divided by average capital employed.
Operating Highlights
Average Benchmark Prices(1) (U.S. dollars per pound, unless otherwise noted) Three Month Average Six Month Average June 30 Mar. 31 June 30 June 30 June 30 2006 2006 2005 2006 2005 Benchmark Principal Products: Styrene monomer(2) $0.62 $0.61 $0.61 $0.61 $0.63 Solid polystyrene(3) North America $0.84 $0.86 $0.86 $0.85 $0.86 Europe $0.66 $0.62 $0.66 $0.64 $0.68
Benchmark Raw Materials: Benzene (dollars per gallon)(4) $3.02 $2.68 $3.06 $2.85 $3.11