Compañía de Minas Buenaventura S.A.A. press release
NOVA Chemicals: Improvement Heading into Second Quarter; Expanded JV for STYRENIX
NYSE - New York Stock Exchange · Peru
PITTSBURGH, April 25 /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 net income of $44 million ($0.53 per share) for the first quarter of 2007. The results include an unrealized gain on feedstock derivatives totaling $17 million after-tax ($0.20 per share) and a negative impact of $8 million after-tax ($0.10 per share) related to the Canadian National rail strike. Net income in the quarter improved due to strengthening margins and the impact of recent cost reductions and restructuring.
Net income for the first quarter compares to a net loss of $781 million ($9.46 per share loss) for the fourth quarter of 2006, which included a $772 million after-tax ($9.35 per share) non-cash restructuring charge related to the write-down of assets in the STYRENIX business unit. In the first quarter of 2006, a net loss of $4 million ($0.05 per share loss) was reported.
During the quarter, NOVA Chemicals announced that it plans to expand its existing European joint venture with INEOS to include North American styrene and solid polystyrene assets. The preliminary target for new synergies is $40 million per year for the joint venture.
NOVA Chemicals also signed a letter of intent with Aux Sable Canada Ltd. to develop a new ethane extraction plant in Alberta that is expected to increase ethane feedstock supply to the Joffre, Alberta site by approximately 25% by 2010. The new ethane supply is intended to increase NOVA Chemicals' utilization of the Alberta Advantage.
"With the expansion of the joint venture with INEOS, we look forward to building upon our success in Europe to rapidly remove costs and continue to expand the positive operating income from the North American business," said Jeff Lipton, NOVA Chemicals' President and CEO.
"We saw a sharp improvement in overall business results in March which we expect to carry over into a strong second quarter," Mr. Lipton added.
First quarter operating income from the businesses was $120 million versus $36 million in the fourth quarter of 2006.
Operating Income First Fourth from the Businesses Quarter Quarter ($U.S. millions) 2007 2006
Olefins/Polyolefins $116 $92 Performance Styrenics (11) (19) STYRENIX 15 (37) Operating Income from the Businesses $120 $36
NOVA Chemicals will host a conference call today, Wednesday, April 25, 2007 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. 3207766). 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) These highlights should be read in conjunction with NOVA Chemicals' other interim and annual financial statement disclosures, as well as its 2006 Annual Report.
Three Months Ended Mar. 31 Dec. 31 Mar. 31 2007 2006 2006 (1) Revenue $1,506 $1,635 $1,553 Adjusted EBITDA (2) $155 $98 $124
Operating income (loss) Olefins/Polyolefins Joffre Olefins $95 $119 $149 Corunna Olefins 27 (11) 8 Polyethylene 6 (24) (2) Eliminations (12) 8 (11) Olefins/Polyolefins Total 116 92 144
Performance Styrenics (11) (19) (4)
STYRENIX Styrene Monomer 8 (18) (15) North American Solid Polystyrene (7) (16) (10) European JV 14 (4) (12) Eliminations - 1 - STYRENIX Total 15 (37) (37)
Corporate (3) (19) (873) (66)
Operating income (loss) $101 $(837) $37
Net income (loss) $44 $(781) $(4)
Net income (loss) per common share basic $0.53 $(9.46) $(0.05) diluted $0.53 $(9.46) $(0.05)
Weighted-average common shares Outstanding (millions) (4) (5) basic 83 83 82 diluted 83 83 82
(1) See Note 2 on page 80 of the 2006 Consolidated Financial Statements within the Annual Report for a discussion of the prior period restatement related to stock-based compensation for employees eligible to retire before the vesting date (EIC 162). The impact to net loss for the three months ended Mar. 31, 2006 was a $1 million benefit. (2) Net income (loss) before restructuring charges, income taxes, other gains and losses, interest expense and depreciation and amortization (see Consolidated Statements of Net Income (Loss) on page 17 and Supplemental Measures on page 11). (3) See tables on page 11 for a description of all Corporate Items. (4) Weighted-average number of common shares outstanding during the period used to calculate the net income (loss) per share (see Note 6, page 24). (5) 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.NOVA Chemicals Supplemental Financial Data (millions of U.S. dollars) This Supplemental Financial Data should be read in conjunction with NOVA Chemicals' other interim and annual financial statement disclosures, as well as its 2006 Annual Report.
Three Months Ended Mar. 31 Dec. 31 Mar. 31 2007 2006 2006 Depreciation and amortization expense Olefins/Polyolefins $43 $44 $41 Performance Styrenics 5 3 3 STYRENIX 4 26 26 Corporate 2 2 2 $54 $75 $72
Capital expenditures Olefins/Polyolefins $30 $24 $19 Performance Styrenics 2 14 20 STYRENIX 5 8 2 $37 $46 $41
After-tax return (loss) on capital employed (1) 9.5% (88.0)% 3.0%
Average capital employed (2)
NOVA Chemicals $3,009 $3,407 $3,579 Olefins/Polyolefins $2,325 $2,358 $2,314 Performance Styrenics $273 $265 $216 STYRENIX (3) $398 $870 $1,134
Funds from operations (4) $62 $60 $71 Cash from operations $2 $88 $15
Return (loss) on average common equity (5) 31.5% (286.1)% (1.3)%
(1) 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). (2) 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). (3) As of Dec. 31, 2006, the capital employed, including cash expended on plant, property and equipment (less accumulated depreciation and amortization and any asset write-downs) and working capital, and excluding assets under construction and investments, for STYRENIX was $392 million. (4) See Supplemental Measures on page 11. (5) Return (loss) on average common equity equals annualized net income (loss) divided by average common equity.
Update on NOVA Chemicals' Strategic Activities
Expansion of Joint Venture with INEOS for STYRENIX
On Mar. 22, 2007, NOVA Chemicals announced plans to expand its existing European joint venture with INEOS to include North American assets. The expanded 50:50 venture will include NOVA Chemicals' North American styrene and solid polystyrene (PS) assets as well as its solid PS-based Performance Products: NAS(R), ZYLAR(R), and DYLARK(R) resins. The venture will also include INEOS' North American styrene and solid PS assets and its AVANTRA(R) specialty products.
The deal is expected to close by the third quarter of 2007. Upon completion, the expanded joint venture is expected to have annual revenues of approximately $3.5 billion and will be the largest styrene and solid PS producer in North America and the largest solid PS and expandable polystyrene (EPS) producer in Europe.
The newly expanded joint venture is expected to build upon the recent success of the European joint venture with INEOS. NOVA Chemicals expects the European Joint Venture to achieve cost savings of $74 million in 2007 and $82 million in 2008, more than double the initial target. The newly expanded joint venture is initially targeting an additional $40 million per year of cost reductions.
On Apr. 24, 2007, NOVA Chemicals and INEOS announced the nomination of the first three senior officers of the proposed, expanded joint venture. The new management team will decide the specific actions to be undertaken to best achieve synergies.
Aux Sable Ethane Extraction Plant
On Mar. 21, 2007, NOVA Chemicals announced it had signed a letter of intent with Aux Sable Canada Ltd. (ASC) to jointly develop an ethane extraction plant in Fort Saskatchewan, Alberta. The ethane extraction plant will have the capacity to produce approximately 40,000 barrels per day of ethane from natural gas currently leaving Alberta via the Alliance Pipeline. The plant will be owned and operated by ASC and is projected to start up by mid-2010. NOVA Chemicals does not expect to provide any capital for this facility and would sign a long-term ethane supply contract for production from this plant.
The new ethane extraction plant would increase current Alberta ethane supply by approximately 15% and bolster NOVA Chemicals' feedstock for ethylene production at the Joffre, Alberta site by approximately 25%. The additional ethane is intended to help maintain and extend the Alberta Advantage by allowing NOVA Chemicals to move ahead with low cost expansions of the Joffre, Alberta ethylene/polyethylene production site and to consider building another polyethylene plant at the site.
OLEFINS/POLYOLEFINS BUSINESS UNIT
Financial Highlights (millions of U.S. dollars except as noted)
Three Months Ended Mar. 31 Dec. 31 Mar. 31 2007 2006 2006 Revenue Joffre Olefins (1) $411 $427 $501 Corunna Olefins (1) 397 515 418 Polyethylene (1) 423 455 467 Eliminations (297) (348) (378) Total $934 $1,049 $1,008
EBITDA (2) Joffre Olefins $107 $132 $161 Corunna Olefins 42 4 20 Polyethylene 22 (8) 15 Eliminations (3) (12) 8 (11) Total $159 $136 $185
Operating income (loss) Joffre Olefins $95 $119 $149 Corunna Olefins 27 (11) 8 Polyethylene 6 (24) (2) Eliminations (3) (12) 8 (11) Total $116 $92 $144
Sales Volumes (millions of pounds) Polyethylene (4) Standard Products 683 722 615 Performance Products 118 143 122 Total 801 865 737
(1) Before intersegment eliminations between the business units. (2) Net income (loss) before income taxes, other gains and losses, interest expense, depreciation and amortization (see Supplemental Measures on page 11). (3) Represents intersegment profit eliminations. (4) The Joffre site produces Standard Products as well as Performance Products, including SCLAIR(R) and SURPASS(R) resins that are produced using Advanced SCLAIRTECH(TM) technology. The other sites produce Standard Products.Operating Highlights Average Benchmark Prices (1) (U.S. dollars per pound, unless otherwise noted)
Three Month Average Mar. 31 Dec. 31 Mar. 31 2007 2006 2006 Benchmark Principal Products: Ethylene (2) $0.40 $0.45 $0.50 Polyethylene - LLDPE butene liner (3) $0.56 $0.58 $0.69 Polyethylene - weighted-average benchmark (4) $0.58 $0.61 $0.70
Benchmark Raw Materials: AECO natural gas (dollars per mmBTU) (5) $6.32 $6.07 $6.54 NYMEX natural gas (dollars per mmBTU) (6) $6.96 $6.62 $9.07 WTI crude oil (dollars per barrel) (7) $58.27 $60.21 $63.48
(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: Canadian Gas Price Reporter, weighted average daily spot gas price, values in millions of British Thermal Units (mmBTU). (6) Source: New York Mercantile Exchange (NYMEX) Henry Hub 3-Day Average Close. (7) Source: NYMEX WTI daily spot-settled price average for calendar month.
Review of Operations
Olefins/Polyolefins
The Olefins/Polyolefins business unit reported operating income of $116 million in the first quarter of 2007 compared with operating income of $92 million in the fourth quarter of 2006. The quarter-over-quarter increase in operating income was primarily related to lower feedstock costs at the Corunna Olefins flexi-cracker, in part due to gains from NOVA Chemicals' propane and butane purchase program. Lower costs more than offset the impact of reduced shipments caused by the Canadian National rail strike. The rail strike reduced operating income by $12 million before-tax ($8 million after-tax) primarily due to lower polyethylene sales volumes.
Joffre Olefins
First Quarter 2007 Versus Fourth Quarter 2006
The Joffre Olefins segment reported operating income of $95 million in the first quarter of 2007 compared with $119 million in the fourth quarter of 2006. The quarter-over-quarter decline in operating income was due to lower ethylene selling prices and higher feedstock and energy costs.
USGC ethylene benchmark prices averaged 40 cents per pound in the first quarter of 2007 compared to 45 cents per pound in the fourth quarter of 2006. Soft demand and lower feedstock and energy costs in the fourth quarter of 2006 and January 2007 led to four months of declines in the benchmark ethylene price. After stabilizing in February, benchmark prices increased in March due to improved ethylene demand and increasing feedstock costs.
Alberta natural gas costs were higher in the first quarter than in the prior quarter. Quarter over quarter, the average AECO natural gas price was up 4% while the average price of NYMEX contract natural gas was up 5%, due to colder than usual weather in the U.S. and Canada during the second half of the first quarter.
The Alberta Advantage averaged 7 cents per pound of ethylene production cash cost in the first quarter of 2007, unchanged from the fourth quarter of 2006. The Alberta Advantage increased to approximately 9 cents per pound in April. NOVA Chemicals uses ethylene produced at its Joffre, Alberta, facility to make approximately 65% of its polyethylene.
First Quarter 2007 Versus First Quarter 2006
The Joffre Olefins segment reported operating income of $95 million in the first quarter of 2007 compared with $149 million in the first quarter of 2006. This decrease was primarily due to lower ethylene prices and was partially offset by lower feedstock costs. The AECO cash natural gas price was 3% lower in the first quarter of 2007 versus the same quarter one year ago. The Alberta Advantage was 7 cents per pound this quarter versus 5 cents per pound in the same quarter of 2006.
Corunna Olefins
First Quarter 2007 Versus Fourth Quarter 2006
The Corunna Olefins segment reported operating income of $27 million in the first quarter of 2007 compared with an operating loss of $11 million in the fourth quarter of 2006. The quarter-over-quarter improvement was primarily due to lower feedstock costs, which more than offset the impact of lower ethylene prices.
While WTI crude oil price declined 3% quarter over quarter, NOVA Chemicals' average crude oil costs declined 12% due to its use of FIFO accounting. In addition, gains realized from NOVA Chemicals' feedstock purchasing program contributed to lower average propane and butane feedstock costs in the first quarter of 2007.
First Quarter 2007 Versus First Quarter 2006
The Corunna Olefins segment reported operating income of $27 million in the first quarter of 2007 compared to operating income of $8 million in the same period one year ago. Operating income improved in the first quarter of 2007 compared with the first quarter of 2006 due to improved operations at the Corunna flexi-cracker and lower feedstock costs, which were partially offset by lower selling prices. In the first quarter of 2006, the Corunna flexi-cracker experienced a delayed re-start after its major maintenance turnaround and modernization project.
Polyethylene
First Quarter 2007 Versus Fourth Quarter 2006
The Polyethylene segment reported operating income of $6 million in the first quarter of 2007 compared with an operating loss of $24 million in the fourth quarter. The quarter-over-quarter improvement in operating income was primarily due to lower feedstock costs, which more than offset the impact of lower sales volume.
The average butene liner benchmark polyethylene price in the first quarter was 56 cents per pound, down 2 cents per pound from the fourth quarter. In comparison, NOVA Chemicals' average selling price was roughly flat quarter over quarter as a result of sales mix improvement.
NOVA Chemicals' total polyethylene sales volume for the first quarter was 801 million pounds, down 7% from the record sales volume in the previous quarter. Sales volumes were lower primarily due to reduced shipments related to the Canadian National rail strike. NOVA Chemicals sold more than 300 million pounds of polyethylene in March, a sharp increase from January and February.
International sales represented approximately 17% of total sales in the first quarter of 2007, roughly the same high level as in the fourth quarter of 2006. NOVA Chemicals continued to take advantage of opportunities for strong netback margins, particularly on sales to China, and expects to do so in the second quarter as well.
American Plastics Council (APC) reported that North American polyethylene producer sales were 1% higher in the first quarter of 2007 than in the fourth quarter of 2006. APC also reported North American producer operating rates averaged 93% in the first quarter, up from 89% in the fourth quarter of 2006. Polyethylene demand improved quarter over quarter as North American producer inventories fell, despite higher production rates. NOVA Chemicals finished the first quarter with 21 days of polyethylene inventory, versus a historical average of 24 days.
In the first quarter, sales volumes of polyethylene manufactured using Advanced SCLAIRTECH technology were down 12% from very strong volumes in the fourth quarter, due in part to the impact of the Canadian National rail strike. Margins improved during the quarter due to higher selling prices and lower feedstock costs.
NOVA Chemicals implemented a 6 cents per pound price increase starting in February for most customers. The increase was fully implemented for all customers by Apr. 1, 2007. NOVA Chemicals is currently implementing a revised price increase of 7 cents per pound for higher performing hexene- and octene-based grades, and 4 cents per pound for all other grades.
On Apr. 24, 2007, NOVA Chemicals announced another polyethylene price increase for 5 cents per pound, effective June 1.
First Quarter 2007 Versus First Quarter 2006
The Polyethylene segment reported operating income of $6 million in the first quarter of 2007 compared with an operating loss of $2 million in the first quarter of 2006. The improvement from the same quarter of 2006 was primarily due to lower feedstock costs, which more than offset lower average selling prices. Weighted-average benchmark polyethylene prices were 58 cents per pound in the first quarter of 2007 compared to 70 cents per pound in the first quarter of 2006.
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.
PERFORMANCE STYRENICS BUSINESS UNIT
Financial Highlights (millions of U.S. Dollars except as noted)
Three Months Ended Mar. 31 Dec. 31 Mar. 31 2007 2006 2006 Revenue $100 $105 $99 EBITDA (1) $(6) $(16) $(1) Operating Loss $(11) $(19) $(4)
Sales Volumes (2) (millions of pounds) 105 116 100
(1) Net loss before income taxes, other gains and losses, interest expense, depreciation and amortization (see Supplemental Measures on Page 11). (2) Third-party sales.Operating Highlights
Average Benchmark Raw Material Prices (1) (U.S. dollars per pound)
Three Month Average Mar. 31 Dec. 31 Mar. 31 2007 2006 2006 Styrene Monomer $0.65 $0.67 $0.61
(1) Source: CMAI Contract Market
Review of Operations
Performance Styrenics
First Quarter 2007 Versus Fourth Quarter 2006