Plastics manufacturer A. Schulman Inc. on Tuesday reported a 16% revenue increase in the May quarter, bolstered by its Citadel acquisition last year.
Stripping Citadel sales, however, revenue would have declined about 4% from the year-ago period on weakness across segments.
Shares, down 31% this year, fell 1.3% to $20.90 in after-hours trading.
Ohio-based Schulman has been investigating possible misrepresentation of product quality at some plants it bought as part of its Citadel acquisition last year. Schulman has filed a complaint against the sellers and former executives of Citadel and its subsidiary Lucent to recoup its losses.
On Tuesday, Schulman said it has spent more than $10 million so far and estimated losses would top the $31 million that had been set aside to resolve such disputes as part of the acquisition.
The company now projects Citadel to contribute to earnings next year.
Over all, Schulman reported third-quarter profit, before convertible special dividends, of $17.4 million, or 53 cents a share, compared with a loss of $9.3 million, or 34 cents, a year earlier, when results were weighed by the Citadel acquisition. Excluding restructuring-related costs and other items, profit was 79 cents a share, up from 72 cents a share a year earlier.
Revenue rose 16% to $650.4 million, as Citadel’s acquisition added about $112.4 million, Schulman said.
Analysts had projected adjusted profit of 78 cents a share on $648.8 million in revenue, according to Thomson Reuters.
Historically, the third quarter is Schulman’s strongest.
Gross profit margin improved to 16.8% from 16.2% a year earlier.
Though based in the U.S., Schulman does most of its business abroad and has been hit hard by falling demand in Europe.
In the latest period, currency conversions lowered revenue by about $6.2 million, Schulman said, as it recorded lower revenue across segments except for the U.S. and Canada, where sales rose 34% again boosted by the Citadel acquisition. Without Citadel, Schulman said, sales would have declined 8.5%.
Schulman, which Tuesday affirmed its profit projection for the year, ended the quarter with about $47 million in cash and $986 million in debt.
By Maria Armental
Source: Wall Street Journal
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