Compañía de Minas Buenaventura S.A.A. press release
NOVA Chemicals: Record Olefins/Polyolefins Performance - Strong Outlook
NYSE - New York Stock Exchange · Peru
PITTSBURGH, October 24 /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 $97 million ($1.16 per share diluted) for the third quarter of 2007.
Net income for the third quarter compares to net income of $80 million ($0.96 per share diluted) for the second quarter of 2007 and a net loss of $24 million ($0.29 loss per share) for the third quarter of 2006, which included charges of $92 million ($1.12 per share diluted) related to restructuring and insurance wind-up costs.
The Olefins/Polyolefins business unit reported record EBITDA of $280 million in the third quarter, up from $228 million in the second quarter. The Alberta Advantage averaged a record 21 cents per pound in the third quarter, up from 13 cents per pound in the second quarter, and has expanded further in October.
"We believe the very strong third quarter market conditions for our Olefins/Polyolefins business will continue into the fourth quarter and well beyond," said Jeff Lipton, NOVA Chemicals' President and CEO. "We are experiencing strong domestic and export demand and improving margins due to price increases that exceed feedstock cost changes."
During the third quarter, the expanded INEOS NOVA styrenics Joint Venture was approved by the U.S. Federal Trade Commission (FTC) and commenced operations on Oct. 1, 2007. In addition, the INEOS NOVA Joint Venture agreed to acquire the exclusive production rights to Sterling Chemicals' Texas City, Texas styrene monomer asset. (See page 4 for details.)
"The combination of the formation of the expanded Joint Venture and the agreement with Sterling creates a strong foundation for further cost reductions in our styrenics business. We also expect market conditions in Europe to recover from a weak summer holiday period," said Jeff Lipton.
EBITDA from the Third Second Businesses Quarter Quarter ($U.S. millions) 2007 2007
Olefins/Polyolefins $280 $228 Performance Styrenics 3 (6) STYRENIX (21) 29 EBITDA from the Businesses $262 $251
NOVA Chemicals will host a conference call today, Wednesday, October 24, 2007 for investors and analysts at 1 p.m. EDT (11 a.m. MDT; 10 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. 3207770). 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 Nine Months Ended Sep. 30 June 30 Sep. 30 Sep. 30 Sep. 30 2007 2007 2006 (1) 2007 2006 (1) Revenue $1,755 $1,676 $1,712 $4,937 $4,884
Adjusted EBITDA (2) Olefins/Polyolefins Joffre Olefins $172 $121 $160 $400 $455 Corunna Olefins 57 58 28 157 89 Polyethylene 60 50 83 132 149 Eliminations (9) (1) - (22) (12) Olefins/Polyolefins Total 280 228 271 667 681
Performance Styrenics 3 (6) (2) (9) (3)
STYRENIX (3) Styrene Monomer (22) 23 5 11 (1) North American Solid Polystyrene (7) (7) (8) (20) (21) European JV 1 13 - 29 (7) Eliminations 7 - (1) 7 (1) STYRENIX Total (21) 29 (4) 27 (30)
EBITDA from the Businesses (4) 262 251 265 685 648
Corporate (5) (11) (31) (68) (59) (142)
Adjusted EBITDA (2) $251 $220 $197 $626 $506
Operating income $188 $150 $13 $439 $157
Net income (loss) $97 $80 $(24) $221 $78
Earnings (loss) per common share basic $1.17 $0.97 $(0.29) $2.67 $0.95 diluted $1.16 $0.96 $(0.29) $2.65 $0.94
Weighted-average common shares Outstanding (millions) (6) basic 83 83 83 83 83 diluted 84 84 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 (loss) for the three months and nine months ended Sep. 30, 2006 was a $1 million benefit ($0.01 per share) and a $nil million loss ($0.00 per share), respectively. See the last paragraph of Note 1, page 25. (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 19 and Supplemental Measures on page 18). (3) The third quarter of 2007 is the last quarter that NOVA Chemicals will report the results for the STYRENIX business unit. Beginning in the fourth quarter of 2007, NOVA Chemicals will report the results of the INEOS NOVA Joint Venture, which was expanded to include North American assets and commenced operations on Oct. 1, 2007. (4) Net income (loss) 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 18). (5) See table on page 12 for a description of all Corporate Items. (6) Weighted-average number of common shares outstanding during the period used to calculate the earnings (loss) per share (see Note 6, page 28).
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 Nine Months Ended Sep. 30 June 30 Sep. 30 Sep. 30 Sep. 30 2007 2007 2006 2007 2006 Depreciation and amortization expense Olefins/Polyolefins $48 $45 $43 $136 $129 Performance Styrenics 8 8 3 21 9 STYRENIX 5 5 27 14 80 Corporate 2 2 2 6 6 $63 $60 $75 $177 $224
Capital expenditures Olefins/Polyolefins $23 $15 $22 $68 $69 Performance Styrenics 6 2 16 10 67 STYRENIX 6 7 9 18 16 $35 $24 $47 $96 $152
After-tax return on capital employed (1) 14.4% 13.0% 0.9% 12.5% 6.2%
Average capital employed (2)
NOVA Chemicals $3,614 $3,316 $3,759 $3,303 $3,703 Olefins/Polyolefins $2,723 $2,538 $2,503 $2,529 $2,433 Performance Styrenics $377 $368 $265 $339 $234 STYRENIX $465 $390 $1,108 $418 $1,137
Funds from operations (3) $186 $160 $83 $408 $251
Cash (used in) from operations $(15) $115 $26 $124 $250
Return on average common equity (4) 44.3% 42.5%(5) (7.0)% 40.4% 7.9%
(1) After-tax return 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 18). (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 18). (3) See Supplemental Measures on page 18. (4) Return on average common equity equals annualized net income (loss) divided by average common equity. (5) Restated - see Note 7 on page 28.
Update on NOVA Chemicals' Strategic Activities
INEOS NOVA Expanded Joint Venture
On Oct. 1, 2007, the expanded INEOS NOVA Joint Venture commenced operations. In addition to the European assets already included in the INEOS NOVA Joint Venture, the expanded 50:50 venture includes NOVA Chemicals' North American styrene and solid polystyrene (PS) assets as well as its NAS(R) and ZYLAR(R) performance resins. The venture also includes INEOS' North American styrene and solid PS assets and its line of specialty polymers. NOVA Chemicals retains its North American expandable polystyrene (EPS), ARCEL(R) and DYLARK(R) resins, and its EPS-based downstream business ventures.
The INEOS NOVA expanded Joint Venture is expected to have annual revenues of approximately $3.8 billion and is the largest styrene and solid PS producer in North America and the largest solid PS and EPS producer in Europe.
The newly expanded Joint Venture is initially targeting $80 million per year of additional cost reductions and EBITDA improvement, including the expected efficiency gains from the anticipated acquisition of Sterling's production rights. NOVA Chemicals' 50% share of this improvement would be $40 million per year.
On Oct. 10, 2007, INEOS NOVA announced its plans to shut down the Montreal, PQ polystyrene site by the end of 2007. The plant has annual production capacity of 120 million pounds, which is approximately 6% of INEOS NOVA's North American polystyrene production capacity or about 2% of North American polystyrene industry capacity. This action represents the first step toward achieving the North American synergies target for INEOS NOVA, as production will be moved to the Joint Venture's most efficient plants.
INEOS NOVA Joint Venture Agrees to Acquire Rights to Sterling's Styrene Production
On Sep. 18, 2007, NOVA Chemicals announced that it had agreed to acquire the exclusive production rights to the styrene production from Sterling Chemicals' facility on behalf of INEOS NOVA. These rights were assigned to INEOS NOVA on Oct. 1, 2007. The FTC is currently reviewing the transaction.
The $60 million cost of the transaction will be fully funded by the INEOS NOVA Joint Venture from cash on hand. Sterling's styrene facility in Texas City, Texas has 1.7 billion pounds of annual production capacity, which represents approximately 11% of North American capacity and 3% of global capacity.
As part of its $80 million per year synergy target, INEOS NOVA is initially targeting $30 million of increased annual EBITDA due to increased sales and lower operating costs by shifting production to the more efficient joint venture styrene monomer sites.
OLEFINS/POLYOLEFINS BUSINESS UNIT
Financial Highlights (millions of U.S. dollars, except as noted) Three Months Ended Nine Months Ended Sep. 30 June 30 Sep. 30 Sep. 30 Sep. 30 2007 2007 2006 2007 2006 Revenue Joffre Olefins (1) $448 $425 $417 $1,284 $1,317 Corunna Olefins (1) 595 502 557 1,494 1,482 Polyethylene (1) 519 475 507 1,417 1,467 Eliminations (356) (296) (335) (949) (1,034) Total $1,206 $1,106 $1,146 $3,246 $3,232
EBITDA (2) Joffre Olefins $172 $121 $160 $400 $455 Corunna Olefins 57 58 28 157 89 Polyethylene 60 50 83 132 149 Eliminations (3) (9) (1) - (22) (12) Total $280 $228 $271 $667 $681
Operating income Joffre Olefins $157 $108 $148 $360 $418 Corunna Olefins 41 42 13 110 47 Polyethylene 43 34 67 83 99 Eliminations (3) (9) (1) - (22) (12) Total $232 $183 $228 $531 $552
Sales Volumes (millions of pounds) Polyethylene Advanced SCLAIRTECH(TM) resins(4) 222 225 224 641 634 All other polyethylene resins 608 605 576 1,820 1,740 Total 830 830 800 2,461 2,374
(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 18). (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 Nine Month Average Sep. 30 June 30 Sep. 30 Sep. 30 Sep. 30 2007 2007 2006 2007 2006 Benchmark Principal Products: Ethylene (2) $0.50 $0.45 $0.51 $0.45 $0.49 Polyethylene - LLDPE butene liner (3) $0.67 $0.62 $0.69 $0.62 $0.67 Polyethylene - weighted- average benchmark (4) $ 0.70 $ 0.64 $ 0.71 $ 0.65 $ 0.69
Benchmark Raw Materials: AECO natural gas (dollars per mmBTU) (5) $4.96 $6.43 $5.03 $5.90 $5.64 NYMEX natural gas (dollars per mmBTU) (6) $6.13 $7.56 $6.53 $6.88 $7.47 WTI crude oil (dollars per barrel) (7) $75.38 $65.03 $70.48 $66.23 $68.22
(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 record EBITDA of $280 million in the third quarter of 2007, up from $228 million in the second quarter. Margins expanded as higher selling prices for ethylene and polyethylene and lower Alberta feedstock costs outpaced higher feedstock costs at the Corunna flexi-cracker.
Third quarter results were negatively impacted by approximately $11 million higher costs ($7 million after-tax) due to the appreciation of the Canadian dollar. Most of NOVA Chemicals' Canadian dollar denominated costs reside within the Olefins/Polyolefins business unit's results.
Joffre Olefins
Third Quarter 2007 Versus Second Quarter 2007
The Joffre Olefins segment reported EBITDA of $172 million in the third quarter of 2007 up from $121 million in the second quarter of 2007. The improvement was primarily due to lower ethane feedstock costs.
Joffre Olefins' ethane feedstock costs decreased sharply from the second quarter due to lower Alberta natural gas prices, which were down 23%. In comparison, United Stated Gulf Coast (USGC) ethane prices were 13% higher compared to the second quarter. USGC ethane prices rose throughout the third quarter and reached record levels as ethane demand strengthened due to strong demand for ethylene and higher prices for competing feedstocks such as naphtha.
As a result, the Alberta Advantage averaged a record 21 cents per pound in the third quarter, up from 13 cents per pound in the second quarter and significantly higher than the 7 cents per pound historical average. The Alberta Advantage expanded further and is about 25 cents per pound in October. NOVA Chemicals uses ethylene produced at its Joffre, Alberta, facility to make approximately 65% of its polyethylene.
Third Quarter 2007 Versus Third Quarter 2006
The Joffre Olefins segment reported EBITDA of $172 million in the third quarter of 2007 compared to $160 million in the third quarter of 2006. The EBITDA improvement was primarily due to increased sales volume and strong ethylene margins in the third quarter of 2007.
Nine Months Ended Sep. 30, 2007 Versus Nine Months Ended Sep. 30, 2006
The Joffre Olefins segment reported EBITDA of $400 million for the nine months ended Sep. 30, 2007 compared to $455 million for the nine months ended Sep. 30, 2006. This decrease was primarily due to lower ethylene selling prices and higher feedstock costs. Industry ethylene selling prices were 9% lower in the first nine months of 2007 than in the first nine months of 2006, as prices remained elevated in early 2006 in the aftermath of Hurricane Katrina. AECO daily spot gas prices were 5% higher in the first nine months of 2007 compared to the same period last year.
Corunna Olefins
Third Quarter 2007 Versus Second Quarter 2007
The Corunna Olefins segment reported EBITDA of $57 million in the third quarter of 2007, compared to $58 million in the second quarter of 2007. Margins remained steady as higher ethylene and co-products revenue was offset by higher feedstock costs.
USGC ethylene industry prices averaged 50 cents per pound in the third quarter of 2007 compared to 45 cents per pound in the second quarter of 2007. Industry ethylene prices continued to rise in the third quarter due to continued strong ethylene operating rates, supply interruptions, and higher feedstock costs incurred by USGC ethylene producers.
In the third quarter, co-product sales volumes were 22% higher than the second quarter, due to strong demand for gasoline blending components and other energy co-products. The average co-product selling price was down 5% from last quarter, due primarily to decreases in the selling prices of chemical co-products benzene and toluene.
Corunna's average feedstock costs were higher in the third quarter than the second quarter. While the average WTI crude oil price increased 16% quarter over quarter, NOVA Chemicals' average crude oil costs increased 9% due to its use of FIFO accounting. Prices for other feedstocks such as propane, butane and condensate rose with the price of crude oil.
Third Quarter 2007 Versus Third Quarter 2006
The Corunna Olefins segment reported EBITDA of $57 million in the third quarter of 2007 up from $28 million in the same period one year ago. EBITDA improved primarily due to lower crude oil feedstock costs, which were 2% lower compared to the same period one year ago.
Nine Months Ended Sep. 30, 2007 Versus Nine Months Ended Sep. 30, 2006
The Corunna Olefins segment reported EBITDA of $157 million for the nine months ended Sep. 30, 2007 compared to $89 million to the same period last year. The improvement was due primarily to lower feedstock costs and improved operations at the Corunna flexi-cracker. Corunna's crude oil costs through the first nine months of 2007 were 4% lower compared to the same period last year. Gains from NOVA Chemicals' feedstock purchasing program also contributed to the reduction in feedstock costs compared to the same period last year.
Polyethylene
Third Quarter 2007 Versus Second Quarter 2007
The Polyethylene segment reported EBITDA of $60 million in the third quarter of 2007 compared to $50 million in the second quarter. The quarter-over-quarter EBITDA improvement was largely due to higher selling prices.
The North American industry butene liner polyethylene price averaged 67 cents per pound in the third quarter, up 5 cents per pound from the second quarter. Continued strong export sales and steady domestic demand enabled producers, including NOVA Chemicals, to operate at high utilization rates and to increase margins during the quarter.
NOVA Chemicals' total polyethylene sales volume for the third quarter was 830 million pounds, the same as last quarter. International sales volume again represented approximately 17% of total sales. Strong international polyethylene pricing in the third quarter, driven by higher global production costs and robust demand, continued to support profitable export opportunities. NOVA Chemicals expects these conditions to continue in the fourth quarter.
According to data reported by the American Chemistry Council, total producer polyethylene sales in the third quarter were the second highest in history. Total sales year to date are 5% higher than the same period last year. Average producer operating rates were 96% in the third quarter, the same high level as the second quarter. NOVA Chemicals ended the third quarter with 25 days of polyethylene inventory, in-line with the company's historical average of 24 days.
Sales of polyethylene manufactured using Advanced SCLAIRTECH technology in the third quarter totaled 222 million pounds. For a second consecutive quarter, rated production and sales exceeded the plant's annual 850 million pound nameplate capacity. Margins expanded further this quarter from record levels in the second quarter, in part due to continued market penetration of higher value products.
This month, NOVA Chemicals won first prize for "best new product" from North America's Association of Rotational Molders. The COSMO(TM) container, a unique collapsible polyethylene portable storage and moving container measuring 8 feet x 5 feet x 8 feet, was recognized by industry experts. Sales of high value rotational molding grades have doubled over the past twelve months, and are expected to continue to grow rapidly as a result of innovations such as COSMO.