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Hexion Posts Q2 Results and Significant Improvement in Epoxy Resin Business

Published on 2015-08-19. Author : SpecialChem

OLUMBUS, Ohio -- Hexion Inc. (“Hexion” or the “Company”) recently announced results for the second quarter ended June 30, 2015.

“We were pleased with our second quarter 2015 results as our diversified portfolio and the positive impact of our ongoing productivity initiatives drove year-over-year gains in our Segment EBITDA despite currency fluctuations,” said Craig O. Morrison, Chairman, President and CEO. “We posted significant EBITDA improvement in a number of businesses, including our base and specialty epoxy resins, and Latin America forest products, which more than offset continued weakness in our oilfield business. We are also pleased to report that we successfully resolved a supplier outage impacting our Versatic™ Acids business and that our Moerdijk, Netherlands site recently returned to normal operations. Going forward, we remain focused on completing construction of our three new formaldehyde sites as key elements of our strategic growth strategy. These new sites remain on track to come online in the second half of 2015 and early 2016.”

Second Quarter 2015 Results

Net Sales. Net sales for the quarter ended June 30, 2015 were $1.09 billion, a decrease of 19% compared with $1.34 billion in the prior year period. The decline in net revenues was primarily driven by the strengthening of the U.S. dollar against most other currencies and lower selling prices from the decline in oil-driven feedstocks, which more than offset gains in several specialty businesses. On a constant currency basis, net sales would have decreased by 9% for the quarter.

Segment EBITDA. For the quarter ended June 30, 2015, Segment EBITDA was $133 million, an increase of 8% compared with $123 million in the prior year period. The increase in Segment EBITDA was primarily driven by strong growth in our base epoxies, specialty epoxies, and Latin American forest products resins businesses. This growth was partially offset by weaker oilfield proppants results and the impact of the U.S. dollar strengthening against most other currencies. On a constant currency basis, Segment EBITDA would have increased 22% for the quarter.

Segment Results

Following are net sales and Segment EBITDA by reportable segment for the second quarter June 30, 2015 and 2014. See “Non-U.S. GAAP Measures” for further information regarding Segment EBITDA and a reconciliation of Segment EBITDA to net loss. Starting in the first quarter of 2015, the Company modified the components of Corporate and Other to include the allocation of certain shared service and administrative function costs that were allocated to the reportable segments in prior periods. Accordingly, for comparative purposes, the Company has recasted its Segment EBITDA results to include these costs within Corporate and Other for all prior periods presented.

Liquidity and Capital Resources

At June 30, 2015, Hexion had total debt of approximately $4.0 billion compared to total debt of $3.8 billion at December 31, 2014. In addition, at June 30, 2015, the Company had $634 million in liquidity comprised of $308 million of unrestricted cash and cash equivalents, $2 million of short-term investments, $290 million of borrowings available under the Company’s asset-backed loan facility (the “ABL Facility”) and $34 million of time drafts and availability under credit facilities at certain international subsidiaries.

On April 15, 2015, Hexion successfully completed a $315 million offering of First-Priority Senior Secured Notes. Proceeds from the offering were used to: i) redeem or repay all of Hexion’s outstanding 8.375% Sinking Fund Debentures due 2016 ($40 million) and ii) repay in full all amounts outstanding under the ABL Facility and for general corporate purposes. In connection with the offering, Hexion also received commitments from lenders to amend its ABL Facility to include certain non-U.S. property plant and equipment in its borrowing base. The ABL Facility amendment closed on July 27, 2015.

As adjusted for the ABL amendment, pro forma liquidity would have been $706 million as of June 30, 2015. Hexion expects to have adequate liquidity to fund its ongoing operations for the next twelve months from cash on its balance sheet, cash flows provided by operating activities and amounts available for borrowings under its credit facilities.

About Hexion


Based in Columbus, Ohio, Hexion Inc. (formerly known as Momentive Specialty Chemicals Inc.) is a global leader in thermoset resins. Hexion Inc. serves the global wood and industrial markets through a broad range of thermoset technologies, specialty products and technical support for customers in a diverse range of applications and industries. Hexion Inc. is controlled by investment funds affiliated with Apollo
Global Management, LLC.

Forward-Looking Statements

Certain statements in this press release are forward-looking statements within the meaning of and made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, our management may from time to time make oral forward-looking statements. All statements, other than statements of historical facts, are forward-looking statements. Forward-looking statements may be identified by the words “believe,” “expect,” “anticipate,” “project,” “plan,” “estimate,” “may,” “will,” “could,” “should,” “seek” or “intend” and similar expressions. Forward-looking statements reflect our current expectations and assumptions regarding our business, the economy and other future events and conditions and are based on currently available financial, economic and competitive data and our current business plans. Actual results could vary materially depending on risks and uncertainties that may affect our operations, markets, services, prices and other factors as discussed in the Risk Factors section of our filings with the Securities and Exchange Commission (the “SEC”).

While we believe our assumptions are reasonable, we caution you against relying on any forward-looking statements as it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, a weakening of global economic and financial conditions, interruptions in the supply of or increased cost of raw materials, the loss of, or difficulties with the further realization of, cost savings in connection with our strategic initiatives, including transactions with our affiliate,
Momentive Performance Materials Inc., the impact of our substantial indebtedness, our failure to comply with financial covenants under our credit facilities or other debt, pricing actions by our competitors that could affect our operating margins, changes in governmental regulations and related compliance and litigation costs and the other factors listed in our SEC filings. For a more detailed discussion of these and

other risk factors, see the Risk Factors section in our most recent Annual Report on Form 10-K and other filings made with the SEC. All forward-looking statements are expressly qualified in their entirety by this cautionary notice. The forward-looking statements made by us speak only as of the date on which they are made. Factors or events that could cause our actual results to differ may emerge from time to time. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Source: Hexion


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