Nova Chemical posts $214M loss
Incoming CEO Confident It Will Endure Stalling Economy
Posted By THE CANADIAN PRESS
Posted 16 days ago
The incoming chief executive of Nova Chemicals (TSX:NCX) says he's confident Canada's largest plastics maker will survive the recession and could even benefit from the pains of its competitors.
Chris Pappas, the president and soon-to-be CEO of Nova, said Thursday that pressures on the chemical industry have forced other companies to shut down some operations, either temporarily or permanently, causing their customers to switch to Nova.
Those closures included a Flint Hills Resources polymers plant in Odessa, Tex., which closed late last year.
"That capacity happened to be a product line that was very similar to a product line that we make in Alberta on a very low-cost basis," said Pappas, after Nova reported a big quarterly loss.
The company booked a loss of $214 million US in the fourth quarter as writedowns and falling revenues reversed a solid profit the previous year.
The loss for the period ended Dec. 30 was worth $2.56 per share and compared with a profit of $126 million, or $1.51 a share, a year earlier, the company said Thursday.
Nova, which reports in U. S. dollars, said revenue slipped to $1.2 billion from $1.8 billion.
Pappas said weakening oil prices affected revenues generated by Nova's petrochemicals. Inventories were sold at a lower price, causing the company to book $364 million in before-tax losses.
"Some of our customers are under a lot of financial pressure for the same kinds of reasons," he said.
Nova Chemicals wrote down the value of its inventory at the end of the year to reflect market prices, incurring another $129 million loss. The company also logged a $111-million before-tax gain due to the appreciation of the U. S. dollar.
The company, which is headquartered in Pittsburgh but has major operations in Sarnia, Ont., and Alberta, has been focusing on slashing costs and raising $400 million in cash and obtaining loans to comply with its debt covenants with bankers.
Continued After Advertisement Below
Advertisement
Earlier this month, Nova announced a plan to reduce its fixed costs by $100 million over the first half of the year. That involved the loss of 400 jobs at its worldwide operations, about 15 per cent of the workforce.
On Thursday, Nova said it was complying with debt covenants on its five revolving credit lines -- totalling $683 million -- and had negotiated new terms with bankers to use the money during the first half of the year.
The conditions require the company to secure another $100 million in additional financing by Feb. 28 (which it is "confident" will be in place), and another $100 million by June 1, which is under negotiations.
Pappas, who replaces current CEO Jeff Lipton this spring, said Nova isn't planning any further job cuts at this point.
"While the chemical industry in general is struggling from low demand, and other problems, the business that we're primarily in is not having anywhere close to that same degree of demand-side struggle," Pappas said.
Article ID# 1412286
