Compañía de Minas Buenaventura S.A.A. press release
NOVA Chemicals: Strong Cash Flow from Improved Operating Performance
NYSE - New York Stock Exchange · Peru
PITTSBURGH, July 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 $80 million ($0.96 per share diluted) for the second quarter of 2007. The results include after-tax restructuring charges totaling $9 million, or $0.11 per share diluted related to NOVA Chemicals' ongoing fixed cost reduction actions.
Net income for the second quarter compares to net income of $44 million ($0.53 per share diluted) for the first quarter of 2007 and net income of $106 million ($1.27 per share diluted) for the second quarter of 2006, which included a $60 million benefit related to Canadian tax rate reductions.
Net income in the second quarter improved relative to the first quarter due to significant margin improvement, particularly in the Olefins/Polyolefins business unit. While North American ethylene and polyethylene price increases were offset by higher feedstock costs on the U.S. Gulf Coast, NOVA Chemicals' feedstock costs increased only slightly quarter-over-quarter resulting in improved margins. The Alberta Advantage increased from an average of 7 cents per pound in the first quarter to 13 cents per pound in the second quarter, and widened to approximately 17 cents per pound in July.
"Our businesses delivered $251 million of EBITDA in the second quarter, which resulted in $115 million in cash from operations," said Jeff Lipton, NOVA Chemicals' President and CEO. "Market conditions and our margins in Olefins and Polyolefins improved each month during the second quarter and are improving further into the third quarter. In addition, our Alberta feedstock advantage is widening again as it did last summer."
After significantly appreciating in the first quarter, the value of NOVA Chemicals' Corunna feedstock open positions did not change significantly in the second quarter. As a result, the mark-to-market impact of these open positions was a $1 million loss in this quarter compared to a $26 million gain in the first quarter. These mark-to-market gains and losses are reflected in the Corporate results.
EBITDA from the Businesses Second Quarter First Quarter ($U.S. millions) 2007 2007
Olefins/Polyolefins $228 $159 Performance Styrenics (6) (6) STYRENIX 29 19 EBITDA from the Businesses $251 $172
NOVA Chemicals will host a conference call today, Wednesday, July 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. 3207769). 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 Six Months Ended June 30 Mar. 31 June 30 June 30 June 30 2007 2007 2006 (1) 2007 2006 (1) Revenue $1,676 $1,506 $1,619 $3,182 $3,172
Adjusted EBITDA (2) Olefins/Polyolefins Joffre Olefins $ 121 $ 107 $ 134 $ 228 $ 295 Corunna Olefins 58 42 41 100 61 Polyethylene 50 22 51 72 66 Eliminations (1) (12) (1) (13) (12) Olefins/Polyolefins Total 228 159 225 387 410
Performance Styrenics (6) (6) - (12) (1)
STYRENIX Styrene Monomer 23 10 (4) 33 (6) North American Solid Polystyrene (7) (6) (8) (13) (13) European JV 13 15 (3) 28 (7) STYRENIX Total 29 19 (15) 48 (26)
EBITDA from the Businesses (3) 251 172 210 423 383
Corporate (4) (31) (17) (25) (48) (74)
Adjusted EBITDA (2) $ 220 $ 155 $ 185 $ 375 $ 309
Operating income $ 150 $ 101 $ 107 $ 251 $ 144
Net income $ 80 $ 44 $ 106 $ 124 $ 102
Net income per common share basic $ 0.97 $ 0.53 $ 1.28 $ 1.50 $ 1.24 diluted $ 0.96 $ 0.53 $ 1.27 $ 1.49 $ 1.22
Weighted-average common shares Outstanding (millions)(5) basic 83 83 83 83 83 diluted 84 83 83 84 83
(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 income for the three months and six months ended June 30, 2006 was a $2 million loss and a $1 million loss, respectively. (2) Net income before restructuring charges, income taxes, other gains and losses, interest expense and depreciation and amortization (see Consolidated Statements of Net Income on page 17 and Supplemental Measures on page 13). (3) Net income before income taxes, other gains and losses, interest expense and depreciation and amortization from the Olefins/Polyolefins, Performance Styrenics and STYRENIX business units, which equals NOVA Chemicals' Adjusted EBITDA less Corporate (see Supplemental Measures on page 13). (4) See table on page 11 for a description of all Corporate Items. (5) Weighted-average number of common shares outstanding during the period used to calculate the earnings per share (see Note 6, page 24).NOVA Chemicals Supplemental Financial Data (millions of U.S. dollars, except as noted) 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 Six Months Ended June 30 Mar. 31 June 30 June 30 June 30 2007 2007 2006 2007 2006 Depreciation and amortization expense Olefins/Polyolefins $ 45 $ 43 $ 45 $ 88 $ 86 Performance Styrenics 8 5 3 13 6 STYRENIX 5 4 27 9 53 Corporate 2 2 2 4 4 $ 60 $ 54 $ 77 $ 114 $ 149
Capital expenditures Olefins/Polyolefins $ 15 $ 30 $ 28 $ 45 $ 47 Performance Styrenics 2 2 31 4 51 STYRENIX 7 5 5 12 7 $ 24 $ 37 $ 64 $ 61 $ 105
After-tax return on capital employed (1) 13.0% 9.6% 14.4% 11.4% 8.9%
Average capital employed (2)
NOVA Chemicals $3,316 $2,979 $3,769 $3,147 $3,674 Olefins/Polyolefins $2,538 $2,325 $2,482 $2,432 $2,398 Performance Styrenics $ 368 $ 273 $ 221 $ 320 $ 218 STYRENIX $ 390 $ 398 $1,168 $ 394 $1,151
Funds from operations (3) $ 160 $ 62 $ 97 $ 222 $ 168
Cash from operations $ 115 $ 24 $ 245 $ 139 $ 224
Return on average common equity (4) 40.6% 31.5% 31.2% 36.8% 15.7%
(1) After-tax return on capital employed equals NOVA Chemicals' net income plus after-tax interest expense (annualized) divided by average capital employed (see Supplemental Measures on page 13). (2) Average capital employed equals cash expended on property, plant 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 13). (3) See Supplemental Measures on page 13. (4) Return on average common equity equals annualized net income 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 2007 2007 2006 2007 2006 Revenue Joffre Olefins (1) $ 425 $ 411 $ 399 $ 836 $ 900 Corunna Olefins (1) 502 397 507 899 925 Polyethylene (1) 475 423 493 898 960 Eliminations (296) (297) (321) (593) (699) Total $1,106 $ 934 $1,078 $2,040 $2,086
EBITDA (2) Joffre Olefins $ 121 $ 107 $ 134 $ 228 $ 295 Corunna Olefins 58 42 41 100 61 Polyethylene 50 22 51 72 66 Eliminations (3) (1) (12) (1) (13) (12) Total $ 228 $ 159 $ 225 $ 387 $ 410
Operating income Joffre Olefins $ 108 $ 95 $ 121 $ 203 $ 270 Corunna Olefins 43 27 26 70 34 Polyethylene 33 6 34 39 32 Eliminations (3) (1) (12) (1) (13) (12) Total $ 183 $ 116 $ 180 $ 299 $ 324
Sales Volumes (millions of pounds) Polyethylene Advanced SCLAIRTECH(TM) resins(4) 225 194 204 419 410 All other polyethylene resins 605 607 633 1,212 1,164 Total 830 801 837 1,631 1,574
(1) Before intersegment eliminations between the business units. (2) Net income before income taxes, other gains and losses, interest expense, depreciation and amortization (see Supplemental Measures on page 13). (3) Represents intersegment profit eliminations. (4) Polyethylene resins that are produced using Advanced SCLAIRTECH technology at the Joffre site, including SCLAIR(R) and SURPASS(R) resins.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 2007 2007 2006 2007 2006 Benchmark Principal Products: Ethylene (2) $ 0.45 $ 0.40 $ 0.47 $ 0.42 $ 0.48 Polyethylene - LLDPE butene liner (3) $ 0.62 $ 0.56 $ 0.63 $ 0.59 $ 0.66 Polyethylene - weighted- average benchmark (4) $ 0.64 $ 0.58 $ 0.66 $ 0.61 $ 0.68
Benchmark Raw Materials: AECO natural gas (dollars per mmBTU) (5) $ 6.43 $ 6.32 $ 5.35 $ 6.38 $ 5.95 NYMEX natural gas (dollars per mmBTU) (6) $ 7.56 $ 6.96 $ 6.82 $ 7.26 $ 7.95 WTI crude oil (dollars per barrel) (7) $65.03 $58.27 $70.69 $61.65 $67.09
(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 EBITDA of $228 million in the second quarter of 2007, a significant improvement from $159 million in the first quarter. The quarter-over-quarter improvement was primarily due to higher selling prices for ethylene, polyethylene, and co-products that outpaced higher feedstock costs. First quarter results were impacted by the Canadian National rail strike which reduced EBITDA by $12 million.
Joffre Olefins
Second Quarter 2007 Versus First Quarter 2007
The Joffre Olefins segment reported EBITDA of $121 million in the second quarter of 2007 compared to $107 million in the first quarter of 2007. The quarter-over-quarter increase in EBITDA was primarily due to higher ethylene selling prices which were partially offset by higher feedstock costs.
USGC ethylene benchmark prices averaged 45 cents per pound in the second quarter of 2007 compared to 40 cents per pound in the first quarter of 2007.
Joffre Olefins' ethane feedstock costs increased slightly from last quarter due to higher Alberta natural gas prices, which were up 2% from last quarter. In comparison, USGC ethane prices were 23% higher relative to the first quarter. USGC ethane prices rose sharply in the second quarter as ethane demand strengthened due to higher prices for competing ethylene feedstocks such as naphtha.
As a result, the Alberta Advantage averaged 13 cents per pound in the second quarter, up from 7 cents per pound in the first quarter. The Alberta Advantage is approximately 17 cents per pound in July. NOVA Chemicals uses ethylene produced at its Joffre, Alberta, facility to make approximately 65% of its polyethylene.
Second Quarter 2007 Versus Second Quarter 2006
The Joffre Olefins segment reported EBITDA of $121 million in the second quarter of 2007 compared to $134 million in the second quarter of 2006. This decrease was primarily due to higher feedstock costs and was partially offset by higher ethylene and co-product selling prices. The AECO spot natural gas price was 20% higher in the second quarter of 2007 versus the same quarter one year ago.
Six Months Ended June 30, 2007 Versus Six Months Ended June 30, 2006
The Joffre Olefins segment reported EBITDA of $228 million for the six months ended June 30, 2007 compared to $295 million for the six months ended June 30, 2006. This decrease was primarily due to lower ethylene selling prices and higher feedstock costs. AECO cash gas prices were 7% higher in the first six months of 2007 compared to the same period last year. Industry ethylene selling prices were 13% lower in the first half of 2007 than in the first half of 2006, as prices remained elevated in early 2006 in the aftermath of Hurricane Katrina.
Corunna Olefins
Second Quarter 2007 Versus First Quarter 2007
The Corunna Olefins segment reported EBITDA of $58 million in the second quarter of 2007, the highest EBITDA since the third quarter of 2000. The second quarter's results compare to EBITDA of $42 million in the first quarter of 2007, which included a net gain of $27 million from the propane and butane feedstock purchase program. The quarter-over-quarter improvement was primarily due to stronger co-product sales volume. Higher selling prices for ethylene and co-products offset higher feedstock costs.
In the second quarter, co-product selling prices were 13% higher than the first quarter. Chemical co-product pricing and volumes improved due to strong demand for propylene and butadiene, while energy co-products pricing and volumes were up due to strong demand for distillate and gasoline blending components.
Corunna's average feedstock costs were higher in the second quarter than in the first quarter. NOVA Chemicals' average crude oil costs were up 11% compared to the first quarter. In addition, higher propane and butane feedstock costs in the second quarter and reduced gains from NOVA Chemicals' feedstock purchasing program contributed to the quarter-over-quarter increase in feedstock costs.
Second Quarter 2007 Versus Second Quarter 2006
The Corunna Olefins segment reported EBITDA of $58 million in the second quarter of 2007 compared to $41 million in the same period one year ago. EBITDA improved due to higher co-product selling prices, lower feedstock costs, and improved operations at the Corunna ethylene flexi-cracker. NOVA Chemicals' average crude oil prices were 2% lower in the second quarter of 2007 compared to the second quarter of 2006. Weighted average co-product prices were 10% higher this quarter compared to the same period last year.
Six Months Ended June 30, 2007 Versus Six Months Ended June 30, 2006
The Corunna Olefins segment reported EBITDA of $100 million for the six months ended June 30, 2007 compared to $61 million to the same period last year. The improvement was due primarily to lower feedstock costs and improved operations at the Corunna flexi-cracker, which more than offset lower ethylene selling prices.
Polyethylene
Second Quarter 2007 Versus First Quarter 2007
The Polyethylene segment reported EBITDA of $50 million in the second quarter of 2007 compared to $22 million in the first quarter. The quarter-over-quarter improvement in EBITDA was primarily due to higher average selling prices and sales volumes, which were offset by higher feedstock costs.
The North American industry butene liner polyethylene price averaged 62 cents per pound in the second quarter, up 6 cents per pound from the first quarter. Improved domestic demand and very strong export sales enabled producers, including NOVA Chemicals, to operate at high utilization rates, reduce inventory, and increase prices during the quarter.
NOVA Chemicals' total polyethylene sales volume for the second quarter was 830 million pounds, up 4% from the previous quarter. Improved seasonal sales volumes in the second quarter and reduced shipments in the first quarter related to the Canadian National rail strike contributed to the quarter-over-quarter increase.
International sales volume represented approximately 17% of total sales, the same high level as in the first quarter of 2007. Strong international polyethylene pricing in the second quarter, driven by higher global production costs and robust demand, continued to create profitable export opportunities. NOVA Chemicals expects these opportunities to continue in the third quarter.
According to data reported by the American Chemistry Council (ACC), North American polyethylene demand improved quarter-over-quarter and inventories fell, despite higher producer operating rates. Producer sales were up 3% from the first quarter driven by growth in both domestic and export sales volumes. Average producer operating rates increased to 96% in the second quarter, up from 93% in the first quarter, while inventories fell by 11 million pounds during the second quarter. NOVA Chemicals ended the second quarter with 19 days of polyethylene inventory, down from 21 days at the end of the first quarter and well below the company's historical average of 24 days.
Total sales volumes of polyethylene manufactured using Advanced SCLAIRTECH(TM) technology in the second quarter were up 16% relative to the first quarter. The quarter-over-quarter sales improvement was mainly due to the commercialization of new products. Margins expanded during the second quarter due to price increase implementation, product mix improvements, improved operations, and lower operating costs. In addition, export markets in the second quarter provided margins superior to those in North America for several applications.
During the second quarter, NOVA Chemicals completed the implementation of a 6 cents per pound price increase for all grades of polyethylene, which was initiated in the first quarter. In addition, NOVA Chemicals implemented a 4 cents per pound price increase for standard grades and a 6 cents per pound price increase for higher-value hexene- and octene-based grades.
NOVA Chemicals is currently implementing a 5 cents per pound polyethylene price increase, originally announced for June 1, and has announced a 4 cents per pound price increase effective August 1.
Second Quarter 2007 Versus Second Quarter 2006
The Polyethylene segment reported EBITDA of $50 million in the second quarter of 2007 compared to EBITDA of $51 million in the second quarter of 2006. Industry ethylene feedstock costs were 4% lower this quarter compared to the same quarter last year. The industry average butene liner polyethylene price was 62 cents per pound in the second quarter of 2007 compared to 63 cents per pound in the second quarter of 2006.
Six Months Ended June 30, 2007 Versus Six Months Ended June 30, 2006
The Polyethylene segment reported EBITDA of $72 million for the six months ended June 30, 2007 compared to $66 million for the same period last year. The year-over-year improvement was primarily due to higher sales volumes and improvements in plant operation. Average unit margins were similar during the two periods.
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 Six Months Ended June 30 Mar. 31 June 30 June 30 June 30 2007 2007 2006 2007 2006 Revenue $ 115 $ 100 $ 106 $ 215 $ 205 EBITDA (1) $ (6) $ (6) $ - $ (12) $ (1) Operating Loss $ (14) $ (11) $ (3) $ (25) $ (7)
Sales Volumes (2) (millions of pounds) 124 105 110 230 210
(1) Net loss before income taxes, other gains and losses, interest expense, depreciation and amortization (see Supplemental Measures on Page 13). (2) Third-party sales.
Operating Highlights
Average Benchmark Raw Material Prices (1) (U.S. dollars per pound)
Three Month Average Six Month Average June 30 Mar. 31 June 30 June 30 June 30 2007 2007 2006 2007 2006 Styrene Monomer $0.71 $0.65 $0.62 $0.68 $0.62
(1) Source: CMAI Contract Market
Review of Operations
Performance Styrenics
Second Quarter 2007 Versus First Quarter 2007
The Performance Styrenics segment reported an EBITDA loss of $6 million in the second quarter of 2007, the same loss recorded in the first quarter.
Sales of expandable polystyrene (EPS) in the second quarter were 22% higher than the first quarter due to improved demand from the construction, cup, and produce box segments. Styrene monomer prices were up 9%. Improvements in EPS margins in the second quarter were offset by weaker ZYLAR(R) and NAS(R) margins.