Compañía de Minas Buenaventura S.A.A. press release
NOVA Chemicals: Record Core Business Performance; Improvement in STYRENIX
NYSE - New York Stock Exchange · Peru
PITTSBURGH, October 18 /CNW/ - NOVA Chemicals Corporation (NYSE:NCX)(TSX:NCX):
All financial information is in U.S. dollars unless otherwise indicated.
NOVA Chemicals Corporation (NOVA Chemicals) reported a net loss of $25 million ($0.30 per share loss) for the third quarter of 2006 compared to net income of $108 million ($1.30 per share) for the second quarter of 2006, which included a $60 million benefit from Canadian tax rate reductions. NOVA Chemicals reported a net loss of $105 million ($1.28 per share loss) for the third quarter of 2005.
The following items had a negative net impact of $103 million after-tax or $1.25 per share on third quarter earnings:
Restructuring charges (see page 3)
-- Carrington, UK joint venture site closure...$46 million or $0.56 per share
-- North American restructuring costs...$33 million or $0.40 per share
Other charges (see pages 10 and 13)
-- Mutual insurance company wind-up costs...$13 million or $0.16 per share
-- Unrealized losses on feedstock derivatives...$11 million or $0.13 per share
Net income from the businesses was $83 million ($1.00 per share) versus $102 million ($1.23 per share) in the previous quarter. The $102 million includes the $60 million tax benefit.
"Looking past the restructuring and other charges, investors will see record operating performance in Olefins/ Polyolefins and improvement in STYRENIX due to our cost reduction program," said Jeff Lipton, NOVA Chemicals' President and CEO.
"The progress in STYRENIX improves the prospects of a deal that will unlock the full value of our core businesses for shareholders."
Third Quarter Snapshot
Core Businesses: $118 million income or $1.42 per share
-- The Core Businesses include Olefins/Polyolefins and Performance Styrenics (renamed from Expandable Polystyrene/Styrenic Performance Products)
-- Olefins/Polyolefins reported net income of $123 million and record EBITDA of $255 million
-- Record Alberta Advantage averaged 17 cents per pound of ethylene cash cost, up from 14 cents per pound in the previous quarter
-- Performance Styrenics net loss of $5 million similar to a net loss of $4 million in the second quarter
STYRENIX: $35 million loss or $(0.42) per share
-- Cash flow from operations in Europe improved to a positive level by the end of the quarter
NOVA Chemicals will host a conference call today, Wednesday, October 18, 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. 3196823). 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) This should be read in conjunction with other interim and annual financial statement disclosures as well as NOVA Chemicals' 2005 Annual Report.
Three Months Ended Nine Months Ended Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30 2006 2006 2005 2006 2005 Net income (loss) Core business units Olefins/Polyolefins $123 $151(8) $26 $344(8) $195 Performance Styrenics (5) (4) (1) (15) (7) STYRENIX (35) (45) (56) (119) (147) Corporate(1) (108) 6 (74) (132) (77) Net income (loss) $(25) $108 $(105) $78 $(36)
Earnings (loss) per common share basic $(0.30) $1.31 $(1.28) $0.95 $(0.44) diluted $(0.30) $1.30 $(1.28) $0.94 $(0.44)
Weighted-average common shares outstanding (millions)(2)(3) basic 83 83 82 83 83 diluted 83 83 82 83 83
Revenue $1,712 $1,619 $1,366 $4,884 $4,183 Adjusted EBITDA(4) $196 $189 $59 $506 $376
Depreciation and amortization $75 $77 $70 $224 $216 Funds from operations $76 $101 $18 $236 $215 Capital expenditures $47 $64 $102 $152 $290 Average capital employed(5) $3,759 $3,769 $3,284 $3,703 $3,343 After-tax return (loss) on capital employed(6) 0.8% 14.6% (10.4)% 6.2% 0.9% Return (loss) on average common equity(7) (7.3)% 31.8% (31.6)% 7.9% (3.5)% >>
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RESTRUCTURING AND COST REDUCTION
NOVA Chemicals has targeted $125 million per year of company-wide cost savings by the end of 2007 related to: the June 26, 2006 restructuring announcement; NOVA Innovene synergies; and the expiry of styrene monomer contracts. By the end of the third quarter, NOVA Chemicals took the necessary actions to achieve a cost savings rate of $69 million per year.
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North American Restructuring
On June 26, 2006, NOVA Chemicals announced plans to restructure its North American operations to better align resources and reduce costs. A separate business unit, named STYRENIX, was created to hold the NOVA Chemicals' styrene monomer and solid polystyrene assets in North America as well as NOVA Chemicals' interest in the European 50:50 joint venture with INEOS. As part of this restructuring, a company-wide cost reduction target was set for $65 million per year by the end of 2006. This savings target includes approximately $35 million per year of savings in the core businesses and $30 million per year of savings in STYRENIX.
NOVA Chemicals reached a North American cost-reduction rate of $52 million per year by the end of the third quarter of 2006, including $13 million per year in savings from the Chesapeake, VA, site closure in June 2006, $35 million in company-wide cost reductions and a $4 million reduction in depreciation. Total cost reduction rates are expected to be at $65 million per year by the first quarter of 2007 and at $69 million per year by the first quarter of 2008.
In the third quarter of 2006, a restructuring charge of $53 million before-tax ($33 million after-tax) was recorded related to severance, pension and other employee-related costs.
NOVA Innovene
Upon start up in October 2005, NOVA Innovene, NOVA Chemicals' European joint venture with INEOS, targeted synergy savings of $40 million per year within 3 years. In the first quarter of 2006, the target was revised upward to $60 million per year within 2 years. At this time, NOVA Innovene is on track to exceed the revised target by the end of the fourth quarter of 2006, well ahead of the shortened timeline. NOVA Chemicals receives 50% of the benefit of the total cost savings.
By the end of the third quarter of 2006, NOVA Chemicals realized cost savings of $17 million. In the fourth quarter, NOVA Chemicals expects to realize additional savings related to the Carrington, UK and the Berre, France plant closures, bringing the annual run rate to $33 million.
On July 25, 2006, NOVA Innovene announced plans to permanently close its Carrington, UK, solid polystyrene facility in October 2006. Accordingly, NOVA Chemicals fully wrote down the value of the plant as of Sept. 30, 2006. NOVA Chemicals incurred a charge of $56 million before-tax ($46 million after-tax), $8 million of which is related to employee severance and departure costs and the balance due to non-cash asset write-downs.
Styrene Contract Expiration
NOVA Chemicals is required to purchase up to 1 billion pounds per year of styrene monomer as part of two supply contracts. NOVA Chemicals estimates that these contracts create $30 million per year of higher costs. The contracted styrene monomer is more costly than its own production, and at times, has forced NOVA Chemicals to reduce operating rates at its own facilities.
The first of the two supply contracts (400 million pounds per year) expires on December 31, 2006 and will save an estimated $22 million per year starting Jan. 1, 2007. The second supply contract (up to 600 million pounds per year) will expire on December 31, 2007 and will save, at current styrene economics, an estimated $8 million per year starting Jan. 1, 2008.
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<< Polyethylene Sales Volumes (millions of pounds) Three Months Ended Nine Months Ended Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30 2006 2006 2005 2006 2005
Standard Products 698 691 587 2,004 1,866 Performance Products 102 146 127 370 328 Total 800 837 714 2,374 2,194 >>
Standard Products and Performance Products, including SCLAIR(R) and SURPASS(R) resins, are produced at the Joffre site using Advanced SCLAIRTECH(TM) technology. The other sites produce only Standard Products.
Review of Operations
Olefins/Polyolefins
The Olefins/Polyolefins business unit reported net income of $123 million in the third quarter of 2006. Second quarter net income was $151 million, including $60 million of Canadian tax rate reductions. Third quarter EBITDA of $255 million is $49 million higher than the second quarter and is the highest quarterly EBITDA in NOVA Chemicals' eight-year history as a publicly traded company. The quarter-over-quarter improvement in EBITDA was primarily related to margin improvement resulting from polyethylene and ethylene price increases which outpaced higher feedstock costs and lower polyethylene volumes.
Ethylene and Feedstocks
USGC ethylene benchmark prices averaged 51 cents per pound in the third quarter of 2006 compared to 47 cents per pound in the second quarter.
Quarter-over-quarter, the average price of NYMEX contract natural gas was down 4% to $6.53 per mmBTU and the average USGC ethane price was up 12% to 76 cents per gallon. USGC ethane prices averaged 189% of NYMEX natural gas cash prices, up from an average of 157% in the previous quarter. The average AECO cash natural gas price of $5.03 per mmBTU in the third quarter was 6% lower than the second quarter.
The Alberta Advantage averaged 17 cents per pound of cash cost of ethylene production in the third quarter of 2006, up from 14 cents per pound in the second quarter. The advantage was higher in the third quarter due to both an increase in USGC ethane prices and a decrease in Alberta ethane costs. NOVA Chemicals uses ethylene produced at its Joffre, Alberta, facility to produce approximately 65% of its total polyethylene.
The price of WTI crude oil averaged $70.48 per barrel in the third quarter, essentially flat from the second quarter. WTI crude prices increased from second quarter levels in July and August but fell sharply in September. NOVA Chemicals' average crude oil costs increased 7% during the quarter due to its use of FIFO inventory accounting. This increase in crude oil feedstock cost was offset by higher co-product revenues from the Corunna flexi-cracker.
Polyethylene
Third quarter polyethylene results improved from the second quarter as higher margins more than offset reduced volumes.
NOVA Chemicals' total polyethylene sales volume for the third quarter was 800 million pounds, down 4% from the previous quarter. Volumes declined in September as customers consumed inventory. International sales represented 10% of total polyethylene sales in the third quarter, essentially the same as the second quarter.
North American producer sales, as reported by the American Plastics Council (APC), declined by 8% in the third quarter relative to the second quarter of 2006. The APC also reported North American producer operating rates averaged 92% in the third quarter. Producer inventories rose to 47 days of sales versus a 45-day five-year average. NOVA Chemicals finished the third quarter with 20 days of polyethylene inventory, down from 22 days at the end of the second quarter.
The average butene liner benchmark polyethylene price in the third quarter was 69 cents per pound, up 6 cents per pound from the second quarter.
Advanced SCLAIRTECH
Sales of Standard and Performance polyethylene products, manufactured using Advanced SCLAIRTECH technology, reached a record high of 224 million pounds, 9% higher than the second quarter. Third quarter market conditions supported a product mix that resulted in sales volumes in excess of the plant's 213 million pound quarterly nameplate capacity.
Third quarter sales of polyethylene Performance Products manufactured using Advanced SCLAIRTECH technology were 102 million pounds, down 44 million pounds from the second quarter due to a quality issue that has been resolved and an opportunistic switch to higher margin standard product production.
Third Quarter 2006 Versus Third Quarter 2005
Net income of $123 million in the third quarter of 2006 was up from net income of $26 million in the third quarter of 2005, due to increased margins and volumes and the impact of 2005 outages.
First Nine Months 2006 Versus First Nine Months 2005
Net income for the first nine months of 2006 was $344 million, up from $195 million for the first nine months of 2005, primarily related to price increases that more than offset higher feedstock costs. Also, polyethylene sales volumes in the first nine months of 2006 were 8% greater than the first nine months of 2005 due to outages that occurred in 2005.
<< PERFORMANCE STYRENICS BUSINESS UNIT
Financial Highlights (millions of U.S. dollars except as noted)
Three Months Ended Nine Months Ended Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30 2006 2006 2005 2006 2005 Revenue(1) $111 $106 $90 $316 $294 Operating loss $(7) $(4) $(1) $(17) $(9) Depreciation and amortization 4 3 3 10 9 Adjusted EBITDA(2) $(3) $(1) $2 $(7) $- Net loss $(5) $(4) $(1) $(15) $(7) Capital expenditures $16 $31 $23 $67 $47 Average capital employed(3) $265 $221 $224 $234 $232 After-tax loss on capital employed(4) (4.8)% (4.6)% (0.6)% (5.6)% (2.2)% >>
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Review of Operations
Performance Styrenics
The Performance Styrenics business unit reported a net loss of $5 million in the third quarter of 2006 compared to a net loss of $4 million in the second quarter. The quarter-over-quarter decline in earnings was primarily related to change in sales mix in North American expandable polystyrene (EPS).
North American EPS
North American EPS sales volume decreased by 8% from the second quarter to the third quarter due to reduced demand in produce packaging. During the third quarter, NOVA Chemicals implemented a price increase of 4 cents per pound.
Styrenic Performance Products
Styrenic Performance Products sales volumes were 10% greater than the prior quarter, driven by growth in ARCEL(R) and ZYLAR(R) resin sales.
During the third quarter, NOVA Chemicals announced the start-up of a facility in Ningbo, China, a venture with Loyal Chemical. The facility provides new finishing capacity for ARCEL moldable foam resin to support growing Asian markets.
In addition, NOVA Chemicals entered into a 50:50 joint venture announced on July 20, 2006 with Dietrich Metal Framing to develop and manufacture durable, energy-saving composite construction products and systems. These systems combine NOVA Chemicals' EPS technology with Dietrich's light-gauge steel framing expertise.
Third Quarter 2006 Versus Third Quarter 2005
The Performance Styrenics business unit had a net loss of $5 million in the third quarter of 2006, compared to a net loss of $1 million in the third quarter of 2005. The impact of higher feedstock costs more than offset the increase in prices and sales volumes.
First Nine Months 2006 Versus First Nine Months 2005
The net loss for the first nine months of 2006 was $15 million, compared to a net loss of $7 million for the first nine months of 2005 as lower EPS margins were only partially offset by higher sales volumes.
NOVA Chemicals' ability to implement announced price increases depends on many factors that may be beyond its control. See Forward-Looking Information on page 15.
<< STYRENIX BUSINESS UNIT
Financial Highlights (millions of U.S. dollars except as noted) Three Months Ended Nine Months Ended Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30 2006 2006 2005 2006 2005 Revenue(1) $555 $510 $443 $1,577 $1,411 Operating loss $(39) $(53) $(70) $(137) $(179) Depreciation and amortization 27 28 26 81 83 Adjusted EBITDA(2) $(12) $(25) $(44) $(56) $(96) Net loss $(35) $(45) $(56) $(119) $(147) Capital expenditures $9 $5 $12 $16 $68 Average capital employed(3) $1,108 $1,168 $1,137 $1,137 $1,176 After-tax loss on capital employed(4) (8.1)% (11.5)% (16.8)% (9.7)% (13.8)% >>
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<< Operating Highlights
Average Benchmark Prices(1) (U.S. dollars per pound, unless otherwise noted) Three Month Average Nine Month Average Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30 2006 2006 2005 2006 2005 Benchmark Principal Products: Styrene monomer(2) $0.70 $0.62 $0.60 $0.64 $0.62 Solid polystyrene(3) North America $0.93 $0.84 $0.82 $0.87 $0.85 Europe $0.76 $0.66 $0.64 $0.68 $0.66 Benchmark Raw Materials: Benzene (dollars per gallon)(4) $3.71 $3.02 $2.82 $3.14 $3.02 >>
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<< STYRENIX Sales Volumes (millions of pounds) Three Months Ended Nine Months Ended Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30 2006 2006 2005 2006 2005 Styrene monomer(1) 351 349 384 1,146 1,207 Solid polystyrene North America 194 192 197 567 619 European Joint Venture 234 246 267 728 774 Total 779 787 848 2,441 2,600
(1) Third-party sales, including purchased volumes resold. Excludes sales to NOVA Innovene. >>
Review of Operations
STYRENIX
The STYRENIX business unit reported a net loss of $35 million in the third quarter of 2006, a 22% improvement over the $45 million net loss reported in the second quarter. The quarter-over-quarter improvement in earnings was related to improved NOVA Innovene results from further cost reduction and some margin expansion.
Styrene Monomer
Styrene monomer margins were up in the third quarter as price increases outpaced increases in feedstock costs. Styrene monomer prices rose to $0.70 per pound from $0.62 per pound in the second quarter. The third quarter average benzene price increased to $3.71 per gallon up from $3.02 per gallon in the second quarter. Benchmark ethylene prices averaged 51 cents per pound, up from 47 cents per pound in the second quarter.
Third-party styrene monomer sales volumes in the third quarter were essentially flat compared with the second quarter. In mid-July 2006, the Bayport, TX plant re-started after having been idled since May 4, 2006 due to the ethylene force majeure declared by Huntsman Corporation and limited ethylene availability on the USGC.
NOVA Chemicals implemented 6 cents per pound of styrene monomer price increases in the third quarter. An additional 6 cents per pound price increase was announced to be effective Oct. 1.
North American Solid Polystyrene (SPS)
North American SPS sales volume increased by 1% in the third quarter compared to the second quarter due to sales to new customers. North American benchmark SPS prices increased by approximately 9 cents per pound from the second quarter.
NOVA Chemicals implemented a total of 8 cents per pound of SPS price increases during the third quarter. A 5 cents per pound price increase was announced to be effective Oct. 1.
NOVA Innovene
In the third quarter, NOVA Innovene reported positive EBITDA, before NOVA Chemicals' corporate charges. NOVA Innovene was EBITDA positive, after NOVA Chemicals' corporate charges, in September of 2006 for the first time since the joint venture started in October 2005.
SPS sales volumes for NOVA Innovene were down 9% from the second quarter, in line with the Western European market.
EPS sales volumes for NOVA Innovene were up 2% from the second quarter. EPS producer inventories remained low at the end of the third quarter. Margins expanded in the third quarter as price increases outpaced higher feedstock costs. The European EPS benchmark price increased by approximately 14 cents per pound from the second quarter.
Third Quarter 2006 Versus Third Quarter 2005
The STYRENIX business unit had a net loss of $35 million in the third quarter of 2006, compared to a net loss of $56 million in the third quarter of 2005. Higher prices more than offset higher feedstock costs and the decrease in sales volume. Cost reduction programs were also a significant factor.
First Nine Months 2006 Versus First Nine Months 2005
The STYRENIX net loss for the first nine months of 2006 was $119 million, compared to a net loss of $147 million for the first nine months of 2005, due to margin expansion in styrene monomer and European EPS, as well as cost reduction.
NOVA Chemicals' ability to implement announced price increases depends on many factors that may be beyond its control. See Forward-Looking Information on page 15.
<< CORPORATE
Before-tax Corporate Items (millions of U.S. dollars) Three Months Ended Nine Months Ended Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30 2006 2006 2005(5) 2006 2005(5) Stock-based compensation and profit sharing(1) $(8) $(3) $(16) $(15) $21 Restructuring(2) (109) (1) (85) (125) (85) Non-cash insurance charge(3) (19) - - (19) (22) Mark-to-market feedstock derivatives(4) (17) 12 17 (30) 3 $(153) $8 $(84) $(189) $(83) >>